Jun 26 • 📢 GENERAL DISCUSSION
Storage & Retail when underwriting
I believe Dave may have touched on this before, but I’d love to get input from anyone who’s encountered something similar.
I’m currently reviewing a deal for a self-storage facility that includes four attached retail spaces. Based on the seller’s asking price, the numbers (specifically CoCR and cash flow) really only make sense if all four retail units remain occupied. If even one or two tenants leave, it significantly impacts the returns. They're not on annual leases, and the length of time they've been at the location vary between 8 months to 4 years.
How should I be thinking about this? Specifically:
- How do you approach valuing the retail component in a mixed-use deal like this?
- Do you underwrite with a vacancy buffer for the retail income?
- Any red flags or structuring tips I should be aware of?
Thanks in advance!
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Storage & Retail when underwriting
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