214,000 SF multi-tenant shallow-bay industrial
Five tenants, one vacant bay, in-place rent at $8.24 per SF against suite-level market rents of $9.25 to $10.50. Short leases and cheap turns are the whole argument: the rollover is the business plan, not the risk.
Kestrel Trade Park is not a real property. Every property in this library is fabricated. There is no address, no listing, no broker, no lender and no transaction behind any of it. The figures are model outputs for illustration, not a valuation, an offer, or investment, legal, tax, appraisal or brokerage advice.
The assumptions
Everything below is an input. Nothing here was inferred, smoothed, or filled in from a market average.
Property and business plan
- Rentable area
- 214,000 SF
- Tenants
- 5, plus one vacant bay
- In-place rent
- $8.24 / SF, blended across occupied space
- Market rent
- $9.25 to $10.50 / SF by suite
- Lease structure
- NNN, $2.42 / SF recovered
- Hold
- 5 years
- Asking price
- $26,750,000
Debt and exit
- Sizing
- 55% loan-to-value
- Rate
- 5.95% fixed
- Interest-only
- 2 years
- Amortization
- 30 years
- Exit cap
- 5.80% on forward NOI
Rollover as the thesis
Every lease in this building expires inside the hold or just past it. In office that reads as risk. Here it is the entire case: tenants are paying $7.10 to $10.10 per SF against suite-level market rents of $9.25 to $10.50, an SF-weighted $9.44, and the model rolls each suite to market as its lease expires. The largest in-place rent in the roll is the cold storage user at $10.10, which is below its own $10.50 market and rolls up rather than down.
Renewal probability runs 70% to 80% by tenant, and the model blends both branches rather than picking one. A new lease carries five to six months of downtime, $8 to $12 per SF of tenant improvements and a 5% commission. A renewal carries $2 to $4 per SF, a 2.5% commission and no downtime. Rebuild this page with only the new-lease branch and the year-3 capital line will come out roughly double what the pro forma shows.
Compare that to the office model in this library, where the anchor rollover costs $45 per SF of improvements and six months of downtime on top of six months of free rent. Same mechanic, roughly four to six times the improvement dollars, and it is why industrial tolerates a rent roll that would frighten an office buyer.
What NNN recoveries actually do
Each tenant reimburses $2.42 per SF against a $2.55 per SF operating cost. That reimbursement is income, and it goes dark during downtime along with the rent. A model that books recoveries as a flat percentage of expenses will overstate income in every rollover year. This one carries them per lease and turns them off when the space is empty.
The debt is deliberately light
At 55% loan-to-value the year-one debt yield is 10.24% and coverage is 1.72x. That is more coverage than the asset needs, and it is a choice: an asset whose income re-prices every four years does not want a loan that has to be refinanced in the middle of a rollover year.
Operating pro forma
Figures in thousands of dollars. Negative amounts are in parentheses, the way an operating statement writes them.
| Line | Yr 1 | Yr 2 | Yr 3 | Yr 4 | Yr 5 |
|---|---|---|---|---|---|
| Gross potential rent | 1,778 | 1,841 | 2,017 | 2,102 | 2,152 |
| Other income and recoveries | 484 | 525 | 528 | 551 | 572 |
| Vacancy and credit loss | (210) | (132) | (182) | (158) | (146) |
| Effective gross income | 2,052 | 2,234 | 2,363 | 2,495 | 2,579 |
| Operating expenses | (546) | (562) | (579) | (596) | (614) |
| Net operating income | 1,506 | 1,672 | 1,784 | 1,899 | 1,965 |
| Capital items | (323) | (172) | (285) | (197) | (208) |
| Debt service | (875) | (875) | (1,053) | (1,053) | (1,053) |
| Levered cash flow (final year includes the sale) | 308 | 625 | 446 | 650 | 21,511 |
| DSCR | 1.72x | 1.91x | 1.69x | 1.80x | 1.87x |
Sources and uses, and the exit
Uses at close
- Purchase price
- $26,750,000
- Acquisition costs
- $454,750
- Financing fees
- $147,125
- Total uses
- $27,351,875
Sources at close
- Senior loan
- $14,712,500
- Equity at close
- $12,639,375
- Total sources
- $27,351,875
Exit
- Forward NOI at exit
- $2,062,479
- Sale price
- $35,559,982
- Selling costs
- ($622,300)
- Loan payoff
- ($14,131,272)
- Net sale proceeds
- $20,806,410
Downside and upside
The same three cases the product runs on every deal. The downside is not a haircut on the answer, it is a full re-underwrite with the assumptions moved.
| Case | Levered IRR | Equity multiple | Year-1 DSCR | What moved |
|---|---|---|---|---|
| Downside | 3.9% | 1.20x | 1.42x | Rent growth at 40% of base, expenses growing 20% faster, exit cap 75 bps wider, vacancy 3 points higher, rate 100 bps higher. |
| Base | 13.9% | 1.86x | 1.72x | The assumptions listed on this page, unchanged. |
| Upside | 19.4% | 2.33x | 1.82x | Rent growth at 140% of base, expenses growing 10% slower, exit cap 50 bps tighter, vacancy 1 point lower, rate 25 bps lower. |
Levered IRR against price and exit cap
Rows are the exit cap rate, columns the purchase price. The centre cell is the base case on this page, so the grid checks itself.
| Exit cap | $24,075,000 | $25,412,500 | $26,750,000 | $28,087,500 | $29,425,000 |
|---|---|---|---|---|---|
| 5.30% | 21.6% | 19.3% | 17.0% | 14.9% | 12.9% |
| 5.55% | 20.0% | 17.7% | 15.5% | 13.3% | 11.2% |
| 5.80% | 18.6% | 16.2% | 13.9% | 11.8% | 9.6% |
| 6.05% | 17.2% | 14.8% | 12.5% | 10.2% | 8.1% |
| 6.30% | 15.8% | 13.4% | 11.0% | 8.8% | 6.6% |
Against these hurdles
A recommendation is only worth anything next to the targets it was measured against. These are this example's own hurdles. In the product they are yours, and you edit them.
The hurdles used here
- Target levered IRR
- 12.00%
- Minimum year-1 DSCR
- 1.35x
- Minimum equity multiple
- 1.65x
Altyst does not supply a target return. It tests the model against the numbers you set.
Advance
- Levered IRR of 13.94% clears the 12.00% target.
- Coverage clears at 1.72x against a 1.35x minimum.
- Equity multiple clears at 1.86x against 1.65x.
- All three hurdles still hold at $27.93M, 4.43% above the asking price.
What clears, and at what price
Each price below is solved by re-underwriting the whole model at that price until the constraint is met. The binding price is the lowest of the three, because a deal has to satisfy every hurdle, not the easiest one.
- Asking price
- $26,750,000
- Price for the target levered IRR
- $27,933,701
- Price for the minimum DSCR
- $34,086,576
- Price for the minimum equity multiple
- $28,549,551
- Value at the target going-in cap (5.75%)
- $26,189,495
- Binding price, the lowest of the three hurdle prices
- $27,933,701
- How the six pages in this library were classified, against the hurdles printed above and nothing else.
- Advance: all three hurdles clear at the asking price.
- IC Review: coverage and equity multiple clear, and the levered IRR misses by less than 100 basis points.
- Reprice: a hurdle fails at the asking price, and a lower price is published at which all three clear.
- Reject: no price in the search band clears every hurdle.
- In the product the same six words come from a wider test that also weighs average cash-on-cash, the downside case and a composite score. Three hurdles clearing is necessary for Advance, not sufficient, and Reject there is a downside test rather than a price search.
Checking this yourself
Every figure came from the same deterministic engine the product runs, in exact decimal arithmetic. The same inputs produce the same result every time, which is what makes a page like this worth publishing at all.
The inputs are on this page in full. Rebuild it in a spreadsheet and the lines should agree. Where a number surprises you, the line above it is usually the reason, and the calculation methodology states the convention used for every one.
Permanent link: https://altyst.ai/models/multi-tenant-industrial-shallow-bay
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