Executive Acquisition Summary & Fiduciary Rationale
This interactive web application provides a complete real estate syndication underwriting analysis for the acquisition of 3547 McHard Road, Pearland, Texas—a 10,000-square-foot early childhood education facility occupied by The Learning Experience (TLE). The seller's initial Offering Memorandum anchors the asset at $3,450,000. However, due to recent shifts in the debt capital markets (5-Year Treasury at 4.49%, driving borrowing costs to 6.99%), a Double-Net (NN) landlord maintenance structure, and a 7-year remaining Weighted Average Lease Term (WALT), acquiring at the asking price produces severe negative leverage and unviable LP returns.
Submit LOI at 9.50% In-Place Cap Rate ($2,807,895 Basis). Do NOT exceed $2.95M (9.04% Cap).
6.99% Cost of Debt Reality
With 70% LTV debt priced at 6.99% (4.49% Treasury + 250 bps), acquiring at the seller's asking cap rate of 7.73% yields a dismal 4.33% LP Cash-on-Cash return. Achieving an institutional 7.88%–9.85% LP cash yield requires negotiating the acquisition price down to $2.808M.
Strong Tenant Operations
The franchisee (RRAY, LLC) generates $1.45M in gross revenue at 98% utilization (114/116 capacity). Adjusted true EBITDAR sits at $515,906, yielding a robust 1.92x Rent Coverage Ratio and $143k in discretionary operator compensation.
Double-Net (NN) Structural Liabilities
Under Texas implied warranty laws, the landlord is legally responsible for roof and exterior maintenance under NN terms. Documented roof panel leaks and exterior stucco cracking require a mandatory $150k upfront LP-funded CapEx reserve pool.