Not deducting for vacancy.

[PL1957]

Not that I'm looking to rehash an old thread, but I came across this recent article that was on point and thought it might be of interest for those involved in this thread.

Retail Investing on False Hopes - The Triple Net Tenant

"Many prospective purchasers of malls have expectations that do not coincide with market realities. Financial analyses are performed based on lofty expectations for change and although the ROI might appear attractive, the probability of them happening can be a very different matter entirely. Most of the time the realities are brought to the forefront when a third-party is hired to perform a market study, such as an appraiser."

I believe the appropriate internet comment to this is ROTFL. The whole gist of his blog entry is that things are riskier in a down market because tenants might want to renegotiate their leases. If you can't make the assumption that a lease will be honored, you can't do a leased fee value - period.

 

[Fred]

If you can't make the assumption that a lease will be honored, you can't do a leased fee value - period.

How much you wanna bet?

 

[PL1957]

How much you wanna bet?

I shouldn't have been so harsh in my language. Of course you COULD do a leased fee value even if you assume none of the leases would be honored, but the question remains, why would you want to?

 

[Fred]

I shouldn't have been so harsh in my language. Of course you COULD do a leased fee value even if you assume none of the leases would be honored, but the question remains, why would you want to?

PL,
You are still being "harsh." Do I really have to post that the reason for "assuming" or forecasting that a lease won't be honored is evidence that a lease won't be honored.

 

[PL1957]

PL,
You are still being "harsh." Do I really have to post that the reason for "assuming" or forecasting that a lease won't be honored is evidence that a lease won't be honored.

I'm really not sure what you are getting at. I would think that if reason did exist to think the lease wouldn't be honored, the lease certainly wouldn't fall within the "credit" or "investment grade" category that the "article" references.