Here's the listing off Loopnet:

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Gander Mountain

College Station, TX With an 8.00% cap rate, this is a great opportunity to purchase a NN investment property in a no income tax state for $12.2 million ...

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You need an account to view the full listing, but the blurb is currently found here:
http://www.loopnet.com/xNet/MainSite/Listing/Search/SearchResults.aspx#/College-Station,TX/Retail/For-Sale/c!ARUIBQAAAQ

Didn't this come up a couple of years ago?

"When the government fears the people, you have liberty; when the people fear the government, you have tyranny." Thomas Jefferson
"The only thing necessary for the triumph of evil is for good men to do nothing."
Edmund Burke

It's not the store per se as a retail establishment, it's an investment play.

Basically, investors purchase what are called "triple net" buildings where the landlord is completely reimbursed for the taxes, insurance, and utilities. Gander Mountain has a long-term lease which more than covers the mortgage and reimburses the LL for taxes, insurance, utilities, etc so that's a zero-cost item for the LL.

Essentially what is being sold is the ground lease. Gander Mountain has ground leased that building site for probably 20-30 years so an investor is guaranteed a stable revenue stream which will far outweigh your debt service costs. With the cost of capital being so cheap right now I'm betting the IRR on your money is pretty solid. Even at a really low cap rate.

[This message has been edited by Finn Maccumhail (edited 7/19/2013 11:49a).]

What happens if that Gander Mountain location goes out of business? Or would they all have to fail before corporate could break the lease?

Generally the lease has a corporate guarantee so if GM went out of business in CS it wouldn't matter. Corporate has to pay the remainder of the lease- or at least a termination penalty.

Not knowing GM's financials but seeing how hard it is for them to compete vs. Academy, if I had the capital I'd buy the building and immediately be looking for replacement big-box tenants because that's a prime location.

STore was listed for sale not soon after they very first opened. My wife noticed it online someplace quite some time ago. I believe it was discussed previously as well...

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Yeah, it's the physical building not the actual business.

Pretty typical for a company like GM who develops their own stores to recoup a lot of their startup on a site by selling the building and negotiating a long-term lease at a little under market rates.

Look at Stan Johnson Company- all they do is broker sites like this. They do a lot of CVS and Walgreen's stores too.

Cool. Thanks for the details.

When I retired, a neighbor wanted me to help him for a few months until he could hire someone....turned out to be a year. He built stores for Family Dollar. He would find a site, get their approval, then design/build. I took the site and went through zoning, platting, site planning, building plans....all the way through the building permit application. Family Dollar would then sell the store and sign a long term lease. Not sure if they owned any of their store.

buzzard- I actually have a deal working on a piece of land in Jacksonville, FL right now with some guys who are doing precisely that for Family Dollar.

It was a neat job for a while. I traveled to some far flung places, attended some interesting council/planning meetings, learned a lot about politics in other parts of the country. FD was pretty good to work for. When I called a lot of places to inquire about building a FD, I often got a cool response. Starbucks was also one of our clients and I always got an enthusiastic response when city staff found out I was looking to build one of them.

Dont be so sure corporate will cover the lease if the store folds. A friend in Clear Lake owns a strip center and her Blockbuster folded. No one paid and it would cost more in legal fees than she would recover so she gave up.

This is a small example, but imagine the losses if Gander closed and you were screwed on rent?

Finn,
Is it possible for someone to own the ground lease and someone else to own the building?
In that scenario would the landlord simply pay the ground lease notes from rental revenue?

If the ground lease is sold, the land owner loses his revenue stream? How does the land owner pay taxes etc on that property?

Just trying to learn...

[This message has been edited by PineTreeAg (edited 7/19/2013 9:38p).]

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Dont be so sure corporate will cover the lease if the store folds. A friend in Clear Lake owns a strip center and her Blockbuster folded. No one paid and it would cost more in legal fees than she would recover so she gave up.

This is a small example, but imagine the losses if Gander closed and you were screwed on rent?

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Clear Lake City blvd and El Camino Real?

Texas Tide,

Yes, that location. Do you know the owner? Are you her partner Dr R?

[This message has been edited by Dubi (edited 7/20/2013 11:45a).]

dubi- the difference there is that Blockbuster as a corporation went bankrupt and generally bankruptcy wipes out lease commitments. Bankruptcy is always a risk and the financial strength of a corporation would play a large role in the valuation of a property. Say you had 2 identical retail centers, both 100% leaesed with long-term leases in place but one is nothing but mom & pop businesses and the other is all chains/franchises with a corporate guarantee- the building with the corporate guaranteed center will be worth a lot more because it's less risky.

PineTree- that's not typical it it can happen. You can specifically divide the property where you have a fee owner (name on the deed) from the owner of the improvements. Depending on the nature of the improvements things can get really tricky and messy.

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Bankruptcy is always a risk and the financial strength of a corporation would play a large role in the valuation of a property.

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That's the thing about that particular Gander Mountain location in College Station. Nobody goes there it seems, and nobody can see how it stays in business. However, if Gander Mountain corporate is solid, and if they're on the hook for a 30 year lease in College Station, maybe that $12 million is an ok investment.

dubi-

I know some of the owners of that property.

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Texas Tide,

Yes, that location. Do you know the owner? Are you her partner Dr R?

[This message has been edited by Dubi (edited 7/20/2013 11:45a).]

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No but my family lives sort of off el Camino, about 3 minutes from that strip center. Generally everything there does well, long time occupants, we love the veterinarian there.... It sucks that Blockbuster went under. It held out longer than you'd think but it still sucks...now I think there's like a feline vet or something there. Doesn't seem right.

Hopefully GM doesn't have to worry about the entire industry collapsing. What happened to Blockbuster does happen but it's not ever century that a game changing technology comes around and utterly destroys your business like the Internet did to blockbuster or Kodak.

I do hope your friend has better luck, that strip mall is a great location, just need to find the right tenants.

An 8 Cap for a NNN investment is a pretty solid return. They are pricing in poor sales at the store location. NNN investments like this are typically for the risk averse or those who don't want management head aches.