My only real buyer for this office building just went asset-selective

Your utilities line is what jumped at me. 96k on 52,000 feet with a building that's 59 percent empty means you're conditioning a lot of vacant space and running common areas at full load. That number goes up if occupancy goes up, but it doesn't go down much if it doesn't. A buyer sees a fixed cost that scales badly.

Naive question from the paper side. If the estate wants cash and one heir is out of state, is there any version where the estate carries part of the price? I've been reading about seller financing and I don't know if it changes anything for a wholesaler since you're assigning out anyway.

@vellum it can change a lot, because a buyer's return on a hard-to-finance asset improves fast if the seller holds paper at a rate a bank won't match. But an estate with three heirs and one who wants cash is close to the worst case for that, since carrying paper is the opposite of what that heir asked for. Whether an estate can even do it depends on the probate posture and that's a question for the estate's attorney, not this thread.

Who buys this. Off what you described, the buyer pool is one of three shapes. A local operator who wants to owner-occupy 15,000 feet and lease the rest, which is a small pool but they pay more than investors because they're buying their own rent. A conversion play, and suburban 80s office to residential mostly fails on floor plate depth and plumbing risers, so that's a maybe. Or a land buyer who prices the pad and treats the building as demolition cost.

Your value-add office guy leaving is not bad luck, that's the whole sector. If your entire buyer list for a half-empty office building was two people, the deal was already thin at contract.

What's the parking ratio and how many acres? In smaller markets I've seen suburban office trade essentially as a parking lot with a building problem on it.

Let me put numbers on the re-tenanting story since that's the part you say you can't underwrite.

59 percent of 52,000 is about 30,700 feet vacant. To lease that you're paying tenant improvements, and second generation suburban office TI in most markets runs anywhere from 15 to 45 a foot depending on how raw the space is, plus leasing commissions at roughly 4 to 6 percent of lease value, plus free rent. Call TI at 25, which is friendly. That's 767k of TI alone. Add commissions and downtime and you're comfortably over 900k before you touch the parking lot at maybe 180k and whatever the roof needs.

So a buyer at 2.35m is really at 3.4m plus carrying the negative for two or three years, on an asset where the exit cap for stabilized 80s suburban office is somewhere north of 9 and the lender may not show up at all.

Run it the other way. If stabilized NOI at 90 percent occupancy and modest rents is say 480k, at a 9.5 exit that's 5.05m. Take off 1.1m of capital, discount three years of risk and negative carry hard, and a buyer wants to be under 2m at absolute best. Your second buyer at 1.34m isn't insulting you, he's showing you his work.

That says price problem. And 90k of fee on top of a number that needs to start with a 1 means you need the heirs to move about 800k. That's not a negotiation, that's a different deal.

@sextant TI at 25 is generous for space that's been dark a while. I've priced second gen office where the ceiling grid was fine and it still ran 38 a foot once you hit ADA restrooms, sprinkler head relocation, and bringing electrical to modern density. Nobody puts the restroom money in their model and it's always there.

tally, has anyone been in the vacant space with a tape measure or are you working off a stacking plan?

The lease documents are where I'd spend the next four days. Two rolls inside 14 months including an 11,000 foot anchor. Read them for renewal options and the rate those options are struck at, for any co-tenancy or exclusivity language, and for whether the landlord obligations on HVAC replacement sit with you or the tenant. An anchor with a below-market renewal option locks your stabilized NOI at a number lower than the one @sextant modeled, and it's the single fact that could kill the whole thesis. Also whether any tenant has a right of first refusal on a sale, because that would sit in front of your assignment.

You have nine days before 25k goes hard. Everything in this thread is a reason to go back to the estate now rather than keep shopping. Even if they say no, you learn it before the deposit and you keep the relationship for whenever the out of state heir gets tired.

@hollow's question is the one I'd chase. Three stories on 52,000 feet, so a 17,000 foot footprint, and suburban office from that era is usually parked at 4 per thousand or better. That's 200 plus stalls and probably four to six acres. Depending on the zoning and what's allowed by right, the land alone in a decent suburban node can be worth more than 45 a foot on a dying building.

Check the zoning and the comprehensive plan designation before you renegotiate, because if that land supports a use someone wants, your buyer pool changes entirely and so does your price story to the heirs. Just don't tell them that until you've verified it, and note that what's publicly available on comparable land sales varies a lot by state since some don't disclose prices at all.