I received a marketing brochure today that, quite frankly, left me a bit shocked. The property is a multi-tenant retail building in a power center in Southern California. The shocking part of the offering was that the seller and broker were NOT attempting to capitalize income from the vacant suites.

Maybe CRE practitioners are starting to figure out that seller rent guarantees and seller leasebacks are total fool’s gold. Buyer’s are finally starting to realize that paying $14.29 for $1 of seller guaranteed income ($1 / 7.00% CAP = $14.29) does not make sense. It is clear why sellers would offer this. They make an additional $13.29 less commissions and any other credits which may be given to the buyer (leasing commissions, TI’s, etc.).