how to determine the value of a convenience store, what is the multiplier

In Selling Property - Asked by John B. - Aug 27, 2010
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Answer(s)

Rob B.
Chandler, AZ

John....
It will depend greatly on several factors:
1. Is it a national credit tenant?
2. Is the lease guaranteed by the corporation or a franchisee?
3. What is the strength of the lease guarantee?
4. What is the term of the lease? What are the terms of increases? How much and how often?
5. Where is the location?
6. What are the demographics of the location?
7. Is it a stand-alone building, part of a larger center, in-line or end unit?
8. Is it a land lease or land and building?
These are the standard questions. The stronger the property the lower the cap-rate. (Not sold on "multipliers, unless you are talking about the business-opportunity and not the ownership of commercial property). Generally, the cap rate will range from a 5.5% to a 7.0%. A higher cap-rate than this on this type of NNN property portends much greater risk of investment, which is usually not welcomed by a NNN investor looking for security.
Rob Baird, CA RE Lic. #544165 (One of the oldest, active licenses in CA)
951 515-5855

Aug 27, 2010
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Terry M.
Broker/Agent
San Diego, CA

John,
Multiplier is more frequently used as a rough sort for apartments and business opportunities. If you are asking for rough valuation guide for an empty building that could be used a convenience store then $/sf would be a relevant measure. Traffic, access, and parking will matter.
If you are curious about the value of leased building with a convenience store as tenant then several factors will come into play: length and terms of lease, and credit of tenant will be most important. Investors will pay more for low risk. So long term lease to national tenant will be worth more than short term lease to local or weak credit tenant. After all landlord expenses a net leased building might sell for 6% - 11% cap rate ~ roughly 16 - 9 times net income to landlord.
A more precise answer can be provided when you talk with commercial investment broker who know your market. Among the best are those who have earned the Certified Commercial Investment Member designation. Many CCIMs could assist you.
Beset of success! Terry Moore, CCIM San Diego

Aug 28, 2010
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Nathanael Q.
Owner/Investor
Madison, CT

The multipier is 1-3times the net plus property. you need to show proof for past 3+ years.

Aug 31, 2010
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Ruby B.
Broker/Agent
South Jordan, UT

how to calculate cap rate

Apr 28, 2016
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