Offered 15% of a 19,600 sf neighborhood center for $60k and running the leasing. Anchor has 22 months left.

The $13,300 recovery gap is the only line in there you can fix without anyone's permission, and you can't fix it until those two leases roll. When do they roll? If it's 2029 you're carrying that leakage for four years and it should come off the price, not off your pro forma.

girder, you're on it. Bid is seal, crack fill, restripe, plus about 4,200 sf of patch at the trash enclosure and the drive aisle. No overlay. Second bid comes back Thursday and I asked that one to price a full overlay so I have both. The lot was sealed three years ago per the seller, no records on when it was last overlaid.

verity, one rolls in 26 months, the other in 51. So yes, most of that gap is structural for the hold.

Two modified gross leases in a seven-tenant center means every reconciliation you send is going to be a fight, because the denominators don't match what the other tenants think they're paying into. I have that problem at smaller scale and it eats 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, you're not recovering the full $84,300 either. Your 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 my markets it's a church or nobody.

You're being asked to put in $60k and also do the work. The $60k is buying you 15% of the upside. The work is what's producing the upside. I'd want to know what the fee is before I cared 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 you may have 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 your $214,000. On my units a turn is $2,800 and three weeks. On that vacant 2,350 sf you're probably looking at $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 it doesn't show up in NOI at all. Your first three years of cash flow may be 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 me run your numbers because I don't think $214,000 survives.

Base $268,400 plus recoveries $71,000 is $339,400 of income. Against $84,300 of recoverable expense you're at $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. Say $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 cairn's TI and LC, which if you amortize a normalized $60k of leasing capital a year across a 5 year hold is another $12,000 of real drag.

I get $222,000 before leasing capital and about $210,000 after, and that's assuming full collection on a rent roll where you haven't shown me a single tenant's financials. On $2.95M that's 7.1%. With 30% down and a 20-year amortization at anything in the sixes or sevens, your debt service on $2.065M is somewhere around $180k to $195k a year. Coverage is thin enough that one small tenant going quiet takes you under 1.20. cairn found the hole, I'm just sizing 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 you 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: they go dark at expiry. You lose $66,000 of base, you carry $8,350 sf, two of the five paying tenants have co-tenancy or kick-out language, and you're funding TI on an anchor backfill at $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.

Ask lantern's sponsor what probability he's assigning to column A. If he says 80% ask 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 I'd want before the $60k moves: the JV operating agreement with the vesting schedule on your carried interest, the management agreement as a separate contract with its own term and termination provisions, and every estoppel from every tenant including the two modified gross ones. Estoppels are where you find the verbal side deals, the free rent nobody wrote down, and the exclusive use clause that means you can't lease the vacant suite to the user who actually wants it.

Also get an attorney in your state to look at whether the promised equity plus fee arrangement creates any registration issue for the raise. That's a licensed question, not a forum question.

Running the labor side of this: seven tenants at that size is real work but it isn't a full-time job. Figure 20 to 30 hours a month steady, plus January reconciliations, plus whatever the lot and roof project costs you in site visits. 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 you signed the tenants up expecting a per-push billback and the contract is seasonal, your recovery math breaks in a heavy winter.

How did this come to you, and what's the comp set? $2.95M on 19,600 sf is $150 a foot. I've been tracking neighborhood centers and I see 1980s product in secondary suburbs trading between $115 and $180 depending almost entirely on whether the anchor has term. Yours has 22 months. If sales in that submarket at $150 all had ten years of anchor term, the 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.

Slow question. If your five-year loan matures 38 months after the anchor decision, what's the plan on each branch? Branch A you refinance into a stabilized center and you're fine. Branch B you're asking a lender to refinance a center at 57% occupancy with a construction project in it. I'd want the sponsor to have written down which lender he'd call in branch B and what that call sounds like, before I sent money. Get any quoted terms in writing, 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. What I'd check is 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, your 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, do it. If it only works when they renew at market, you don't have a deal, you have an option that somebody is charging you 7.25% to hold.

lantern, when the second lot bid comes in ask them to core it or at least dig two test holes. Sealcoat over a failed base is money set on fire and you'll be back in 30 months. And find out from the seller when the lot was actually overlaid, not sealed. If nobody knows, assume never and price it.