Pad site development is a compelling aspect of commercial real estate. Pam Goodwin, who is the President and CEO of Goodwin Commercial in Dallas, joined Jim Kelley of Champions DFW on a Friday morning edition of “Texas Money & Business” on 620 AM KEXB in Dallas. They discussed pad site development including investment properties.
Here is an excerpt from that radio show and podcast…
Jim: Well, Pam, we were talking earlier why folks should take a look at acquiring investment property, be it a single tenant or a multi-tenant property. Can you give us a quick summary of your thoughts or your recommendations on the front-end in terms of why should somebody want to invest in commercial real estate and how they would go about it on the front-end?
Pam: Sure. Goodwin Commercial focuses on single tenant net leased properties. And I don’t think most people realize that you could actually a Starbucks. You can own a Walgreens, a CVS, a national McDonald’s tenant, and you don’t have to operate it. But as a landlord, all you do is collect mailbox money, is what they call it. And a lot of people don’t realize how to acquire these, and I feel it’s really important. It should be part of your portfolio to own as if you had a mutual fund. But the benefit of owning a single tenant net lease property is that buying one typically only require 20% down, and then you can own that building. And what happens is it’s great to have that mailbox money coming in, and as the landlord, the tenant takes care of the taxes, insurance, and all the maintenance.
Jim: Excellent. Excellent. Do you see those opportunities available today? How do you see the market? Are there good investment opportunities to buy such investment properties today of the national credit retailers?
Pam: Yes, it’s definitely this time. It’s definitely a seller’s market. So the cap rates are lower. And you always want to buy at a higher cap rate, say a 10%, and that’s what the amount of money you’re making. So instead of making maybe 0% in the bank, you’ll be making 10% on your money. But those opportunities you have to go find them. There’s a lot of hidden opportunities that aren’t listed on the market, and you have to have a good broker that you can work with like yourself.
Jim: Excellent. I appreciate that. Before we get into that, talk just a few minutes about cap rates. Where are you seeing cap rates today? You mentioned, obviously, 10 is better than a 5, but where are you seeing cap rates for national credits today?
Pam: So for national, I recently…McDonald’s is probably McDonald’s and Chick-fil-A is…I just saw a 3.5 cap rate on those two tenants. So 3.5, it’s really dropped a lot.
Jim: What kind of terms or lease terms are you seeing on those triple net-type leases that are selling at a 3% cap? Are you seeing 20-year terms, 25-year terms?
Pam: They’re still typically 10-year lease deals, 10 to 15. And if you’re interested in acquiring these, there’s different things that you need to look for, but you definitely want to look for rent bumps and a location in case that tenant ever goes out, and there’s other things to look. For example, we’ve developed Walgreens, and a top Walgreens. You may think they’re all the same, but a high performing one usually is open 24 hours a day and a double drive-through, versus one that’s open just until 10 o’clock. So there’s different things to look for, and so you need to have the right broker if you’re looking to invest in one of these type properties.
Listen to the entire pad site development conversation in the podcast below or on iTunes.
Learn more about what Champions DFW can do for you, here.
From Pad Site Development to a Lease Opportunity
Champions DFW has a new listing for lease. It’s a medical office space located at 8845 Davis Boulevard in Keller (76248). It’s located just blocks from Southlake Town Square. It’s move-in ready, has a finish out allowance, building/monument signage, generous parking and more. Interested? Contact us.
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