Bought a 1998 suburban building at $58/sf because the anchor signed a renewal 11 days before closing

The renewal as a closing condition is clean and I'm stealing the idea for a different asset class entirely. What I want to know is who paid the anchor's broker, because 7 years on 31,000 sf at $19.75 is somewhere near $270k of commission and it doesn't appear in your numbers.

So if the engineering firm had said no, you walk and the seller is still stuck. Did he have any other bidder at all, or did you effectively have the building for free until the tenant decided?

The thing I'd push on is the $42/sf. That's a real number for a 1998 building getting a full refresh, and it's also the number that goes wrong most often, because the tenant's space plan lands after the lease signs and the pricing comes back 20 percent over. You escrowed exactly the package. Who eats the overage, you or the tenant, and is there a hard cap with the tenant paying anything above it in additional rent? If that clause isn't there, your $58/sf basis is really $58 plus whatever the contractor discovers above the ceiling.

Sorry for the basic one. Why does the tenant get 6 months of free rent AND $42/sf of construction money on a renewal? They're already there, they're not moving anything.

@ember because the alternative landlord across the street is offering the same package to steal them, so the renewal has to compete with the market deal. That's the whole economics of office right now. Face rent looks stable and net effective rent is where the concession fight actually shows up.

@flint the number I'd want from you is capital per square foot per year over a full cycle, not the year one figure. On a four story 1998 building with a deck, you've got the deck itself, elevator modernization somewhere in the next decade, and rooftop units at end of life. My own reserve assumption on that vintage is $2.75 to $3.25/sf including re-leasing capital, and yours at $1.75 was going to be wrong regardless of the deck. At $3, that's $192k a year against $487k of NOI, which changes the yield on your basis from something like 13 percent to something like 8. Still a good outcome. Just a different one from the headline.

Nine days to find $410k is the sentence in this post I'd underline. Most people telling this story didn't have it and the deal died at the appraisal, and we never hear those. Did you have that sitting in cash the whole time or did you have to call someone?