I have been asked to value a property that has an STNL (food use) that sits on a pad within a shopping center. The shopping center and the single tenant building are on the same parcel.
Currently, I am urderwriting the investment and was curious whether there is a best practice for a property in this type of format. Should I just consider the single tenant building as if it were just another tenant in the shopping center? Should any additional consideration be given to the creditworthiness of the tenant in the single tenant building?
Thoughts or suggestions?
If anything you could argue that the pad demands a premium (e.g. cap it at a lower rate) depending on the tenant quality and lease terms.
There would not be any premium achieved simply because they are on the same parcel.
If the SNTL was purchased/financed as its own collateral (not including the shopping center space), it would almost certainly be subdivided from the rest of the center before/at closing of the transaction. At that point you would value it as you would any other shadow anchored property.
To cre_questions point, yes the pad itself would likely generate a premium relative to a similar property without a shadow anchor, since you do have a (presumably) national/credit tenant to drive traffic.
What's the purpose of the valuation? That would dictate how I'd look at it.
E.g. if I'm buying the center and can split the parcels and sell the pad standalone, then yeah I would probably ascribe a higher value / lower cap rate to it. If I'm looking at cash flows as a lender with no intent to release parts of my collateral, then I'd just lump it in with the rest of my cash flows.
The owner is looking to sell. They once considered splitting the parcel but ultimately opted not to.
I think if it were two parcels it would make the investment much more attractive but that just doesn't seem like it would be a possibility under the current owner.
A buyer would probably want to buy it as one and then split it off themselves.
Or would it be reversed as the net lease could be sold to a net lease investor and the shopping center to a traditional retail investor instead of selling it to someone who would buy it to sell off the component parts?
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