Fifteen percent of a 19,600 square foot center for 60k, with 22 months left on the anchor

The $13,300 recovery gap is the only line here that can be fixed without anyone's permission, and it cannot be fixed until those two leases roll. When do they roll? If it's 2029, that leakage gets carried for four years and it should come off the price, not off the pro forma.

A typical bid on a job like this breaks out as seal, crack fill, restripe, plus a patch allowance for high wear spots such as a trash enclosure or a drive aisle, without a full overlay. It's worth getting a second bid priced for a full overlay as a comparison, so both options are on the table. If the seller says the lot was sealed a few years back with no record of when it was last overlaid, that gap belongs in the underwriting. On anchor timing, when one lease rolls in around 26 months and the other in 51, most of that gap is structural for the hold, not incidental.

Two modified gross leases in a seven-tenant center means every reconciliation sent out is going to be a fight, because the denominators don't match what the other tenants think they're paying into. That problem shows up at smaller scale too, and it can eat a weekend every January. Watch the admin fee and the cap language in the five leases that do recover. If three of them cap controllables at 5% cumulative and taxes just jumped, full recovery of the full $84,300 isn't happening either. The gap may be wider than $13,300.

Who backfills 6,000 sf in that trade area if the grocer walks? Name the actual users. In plenty of markets the honest answer is a church or nobody.

An operator being asked to put in $60k and also do the work should separate the two. The $60k is buying 15 percent of the upside. The work is what's producing the upside. Know what the fee is before caring about the equity at all.

No sales reporting from the anchor is the part that got me. You're pricing a renewal at market and you can't see whether the store makes money. Is there anything in the lease at all, gross sales breakpoint, percentage rent, radius clause? Any of those would at least tell you the store exists in their reporting.

What's the parcel? 19,600 sf of building on a signalized hard corner usually leaves surplus frontage. If there's 25,000 to 35,000 sf of excess along the signal there may be room for a pad, and a ground lease to a coffee or quick-service user can be worth more than fixing the recovery gap. Check the zoning district and whether a drive-through is permitted by right or needs a special use permit, because that varies by municipality and the answer changes the value.

Parcel's point cuts both ways though. Carve a pad out and you take parking away from the anchor. What's the current ratio per thousand and what does the grocer's lease require?

Slightly behind everyone here. When lantern says 15% of the equity behind a 7% pref, does that mean the LPs get paid 7% first and lantern only sees anything above that? And is the recovery gap just tenants who don't pay their share of taxes?

Five-year debt term with 22 months of anchor term is the mismatch I'd lose sleep over. You refinance in year five having either signed the grocer at market or not, and those are two completely different appraisals. Ask the lender now what they'd size against a rent roll with 8,350 sf vacant. If the answer is a cash-in refi, that's the risk, and it lands on the LPs before it lands on your 15%.

Why is the seller selling 22 months ahead of a below-market anchor renewal that could add real income? Either he doesn't think it renews, or he can't fund the lot and the roof units, or someone else has already told him no. I'd ask him straight and watch which one he reaches for.

Coming from apartments, the thing that jumps out is there's no TI or leasing commission anywhere in that $214,000. On a typical apartment turn, $2,800 and three weeks is normal. On a vacant 2,350 sf retail suite, expect $30 to $45 a foot of allowance for a restaurant or service user, plus commissions on both sides, plus free rent. That's $80k to $110k of capital to fill one suite, and none of it shows up in NOI. Cash flow in the first three years can run much thinner than the cap rate suggests.

Or wait. The renewal answer arrives in 22 months for free if you're not the owner. Deals like this come back around, and the version that comes back with a signed anchor extension at market is worth more than the discount you'd win today by arguing.

Let's run the numbers, because $214,000 doesn't survive. Base $268,400 plus recoveries $71,000 is $339,400 of income. Against $84,300 of recoverable expense, that's $255,100, and that's before anything non-recoverable. Management at 4% of collections is roughly $13,600, and most centers carry another $8k to $15k of non-recoverable admin, insurance deductible exposure and unbilled repairs. Call it $242,000. Now reserves. 19,600 sf at $0.25/sf is $4,900, which is low for a 1988 building with two dying rooftop units. Call it $0.40, so $7,800. Then TI and LC, which if a normalized $60k of leasing capital a year is amortized across a 5 year hold is another $12,000 of real drag. That lands at about $222,000 before leasing capital and roughly $210,000 after, and that's assuming full collection on a rent roll where no tenant financials have been shown. On $2.95M that's 7.1%. With 30% down and a 20-year amortization at anything in the sixes or sevens, debt service on $2.065M runs somewhere around $180k to $195k a year. Coverage is thin enough that one small tenant going quiet takes it under 1.20. cairn found the hole; this just sizes it.

Genuine question about the shape of the offer rather than the deal. If lantern's real business is the leasing and CAM work, is the $60k and the 15% making that business better or worse? Because now every hard conversation with the owner is also a conversation with a partner, and if you get removed from the JV you've lost a client and a position at the same time.

Build it as two columns and stop refining the middle. Column A: grocer renews in 22 months at $15.75, so 6,000 sf goes from $66,000 to $94,500, and the small shop rents signed off their traffic hold. NOI steps to roughly $250,000 with the recovery gap still in place. That's a good deal at $2.95M. Column B: the anchor goes dark at expiry. Base rent of $66,000 disappears, $8,350 sf carries with no tenant behind it, two of the five paying tenants have co-tenancy or kick-out language, and TI on an anchor backfill runs about $40 a foot on 6,000 feet plus 12 to 18 months of downtime. That's $400k of capital and a year of negative cash flow at 70% leverage. Worth asking the sponsor what probability he's assigning to column A. An 80% answer deserves a why, because 22 months with no sales reporting and rent 30% below market is exactly the profile of a store that leaves. The deal is a bet on 6,000 sf, and the price should reflect that it's a bet.

On the structure: is your 15% subject to dilution if there's a capital call? Because sextant's column B is a capital call, and if the LPs fund it and you don't, a lot of operating agreements grind sweat equity down to nothing right when the work gets hardest. Also worth pinning down whether your 15% is of profits only or of distributions above return of capital, those are very different documents.

What's a holdback in this context? Money the buyer keeps in escrow until the anchor signs?

Ember, roughly yes, some portion of the price sits in escrow and releases to the seller if the renewal happens by a date, or the buyer keeps it if not. Sellers hate them and sometimes take them.

Lantern, I'd do what marlow said. Take the management and leasing contract, take a small co-invest if you want alignment, skip the GP slice on a deal whose whole outcome depends on a decision made in a regional grocer's real estate committee that you will never be in the room for. I've been a few deals in and the ones that hurt were the ones where I was responsible for an outcome I didn't control.

Who are the other two LPs and have they been through a dark anchor before? If the answer is no, the capital call in column B doesn't happen and the deal restructures around whoever will write the check. That's usually the person who ends up owning it.

The documents to want before cash moves on a structure like this are the JV operating agreement with the vesting schedule on the carried interest, the management agreement as a separate contract with its own term and termination provisions, and every estoppel from every tenant including the modified gross ones. Estoppels are where the verbal side deals turn up, the free rent nobody wrote down, and the exclusive use clause that means the vacant suite can't go to the user who actually wants it. Also worth getting an attorney in the relevant state to look at whether a promised equity plus fee arrangement creates any registration issue for the raise. That's a licensed question, not a forum question.

On the labor side, seven tenants at that size is real work but it is not a full time job. Figure 20 to 30 hours a month steady, plus January reconciliations, plus site visits tied to the lot and roof project. Snow is the one that surprises people. On a lot that size in a midwest metro, a seasonal contract with unlimited pushes is a five figure line item, and if tenants were signed up expecting a per push billback while the contract is seasonal, the recovery math breaks in a heavy winter.

How did this opportunity come together, and what's the comp set? $2.95M on 19,600 sf is $150 a foot. Tracking neighborhood centers generally, 1980s product in secondary suburbs trades between $115 and $180 depending almost entirely on whether the anchor has term. With 22 months left on the anchor lease here, if comparable sales at $150 all had ten years of anchor term, this price isn't in the range.

Curious about the mechanics of your day job here. When you clean up CAM for an owner, what are you actually working from, and how are you handling reconciliations, spreadsheets or something like Yardi or AppFolio? The two modified gross leases in a seven-tenant pool sound like the exact problem I'd want to watch someone solve.

Worth asking a slow question here. If the loan matures 38 months after the anchor decision, what's the plan on each branch? Branch A, refinance a stabilized center, is fine. Branch B, asking a lender to refinance a center at 57% occupancy with a construction project in it, is a much harder conversation. A sponsor should be able to say which lender he'd call in branch B and what that call sounds like, before anyone sends money. Any quoted terms should be gotten in writing, since they move.

The 2,350 sf vacancy might be easier than the thread assumes. Average new retail lease sizes have been falling, and that footprint is right in the zone service and restaurant operators are hunting. Worth checking whether the space can physically take a restaurant: grease interceptor, hood path to the roof, gas service size, and whether the landlord or the tenant pays for that. If it's a shell that needs $150k of infrastructure, the prospect list shrinks to nail and hair again.

On quill's point, the venting is where these get expensive. Getting a hood through a 1988 roof and up over the parapet with the right clearances, plus makeup air, plus a grease line and interceptor, is $90k to $140k in the markets I work, before the kitchen. Two rooftop units at 19 and 21 years also means the curbs are probably not sized for anything modern, so budget curb adapters. And if you're touching more than a small share of the roof area for new penetrations, ask the roofer whether the existing membrane can even be tied into or whether you've just started a re-roof.

Back to the simple version. Price it at the anchor going dark, and if the deal still clears at that price, it's worth doing. If it only works when they renew at market, that's not a deal, it's an option that somebody is charging 7.25% to hold.