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The Chinese Will Buy Anything At Any Price

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Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Poultry Farmer showed me a contract of a poultry farm, unsolicited offer was $6.1 million with Chinese investment group offer. He turned it down. When they found he had an annual incentive payment coming from Tyson as well, they upped the ante to $6.8 million. He has under $5 million invested. This is nuts. 2 houses are 10+ years old and smaller than the other 10 which cost $300,000 each to build. 100 acre, MH, and 20+year old 1400SF frame farm house. crazy. 8.8% cap rate for building w 18 years remaining life?
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
That's just the price of money laundering.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
8.8% cap rate
That's your answer. It is crazy, but investors are desperate for good yield and these 5% or 6% investments just aren't that appetizing. If you think about it, a flat 20-year lease at a 5% cap rate yields profit only at the reversion, and considering that those types of properties are often declining assets, the real return is quite a bit less than 5%. Especially when those cap rates are derived by above-market leases, so you not only have building depreciation but lower market rents in the reversion.

I'm one that tends to shy away from pointing the finger at the government for issues, but I believe the bubble in commercial properties could be attributable to the Fed. I was going to say commercial investment-grade properties, but the quest for a better return has diluted what is defined as investment grade.
 

AMF13

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
$6.8Mil - $5Mil invested would = I'm selling and walking away to me. :D
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
A flock with avian flu within five miles puts you out of business
 
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