Wednesday, September 30, 2009
Remember when evidence of a ridiculous decision was often followed by "and if you believe that, then I've got some oceanfront property in Arizona to sell you"?
Well, that quip is now so very 1900's. These days, the new motto of futility is apparently "and if you believe that, then I've got a strip mall in SoCal's Inland Empire to sell you."
This article from the interesting Retail Chatr blog explains why:
It should be noted that the property is being offered with an assumable loan with a current balance of approximately $8,665,000. As far as I can tell, this property is not worth the debt which encumbers it. The reality is really worse than the values depicted in the above table. True capitalization rates for this type of asset are likely approaching 9.00% (if not higher) and most investors would not be comfortable with a vacancy factor as low as 10% in this trade area. Additionally, my quick look at the property does not even take into account loss of rents for tenant turnover (which will undoubtedly happen in the not-to-distant future) or expenditures for tenant improvement allowances, leasing commissions and carried expenses.
The sale of this property in its current condition and anywhere near the asking price is a lawsuit waiting to happen (emphasis added)