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Case Studies

Asset Repositioning and Sale – West Hollywood


Background

An absentee owner wished to sell his 12-unit multifamily building located in West Hollywood. Being out-of-state, owning and managing a California asset no longer aligned with his plans. His goal was to dispose of this asset, and he engaged our Apartment Building Trader Team to conduct a property analysis to determine the value of the asset prior to disposition.


Challenge

The value determined by our property analysis was lower than the value the owner was hoping to achieve. We identified that the issue was the NOI generated by the property at that time – it simply was not high enough to demand a higher value from the market.


Strategic Evaluation

  • The asset had considerable rental upside. Hence, if we increased the NOI, we could achieve the owner's desired value goal.
  • Also, if the owner carried back the first trust deed, offering seller financing to prospective buyers, the likelihood of achieving his value would further increase, due to the availability of leverage at more attractive terms and interest rates than any bank could offer at the time.


Business Plan

We implemented aggressive property management and raised rents on the below-market units to achieve a higher NOI that would support the owner's desired market value.


Execution

Our Team immediately took over the management of his property. Over the course of the following three months, we raised the rents of three of the below-market units as they became available, increasing the NOI by 8%. The Seller granted us the Exclusive Right to Sell, and we launched our marketing campaign, positioning the asset appropriately. We sold the property and closed escrow within 40 days from the time we hit the market.


Outcome

The management, repositioning, and sale proved to be a win-win situation for everyone involved. We helped the Seller achieve the successful sale of his building at his desired price, and freed him of the stresses of absentee ownership. We also secured an additional income stream for him from the interest he was earning on the financing he provided to the buyer. The Buyer was pleased to purchase a quality asset at a fair value in a highly desirable trade area. He was also happy with the attractive leverage he secured from the seller carrying back the first trust deed. The Buyer has also become a loyal, repeat client of our Team and has engaged our services to exclusively represent him in two additional purchases to add to his portfolio and achieve his multifamily investment goals.

 

 

 

Value-Add Owner User Sale – Beverly Hills


Background

The subject property, a 32-unit apartment complex built in 1939, was constructed, owned, and occupied by the original owner. Now an aging widow, management and maintenance were becoming more than the owner was willing to bear. Given the building's severe deferred maintenance, she wished to dispose of the property and remain a tenant in her unit after the sale.


Challenge

  • The property straddled Beverly Hills and Los Angeles border.
  • Our value analysis was much higher than that which a trusted advisor of the owner believed the value to be.
  • Severe deferred maintenance required large capital expenditures.
  • The owner wanted a private sale. Tenants were not to be notified of, or disturbed during the sale.
  • The owner wished to remain as a tenant after the sale.

 
Strategic Evaluation

  • The asset was highly desirable due to its location and considerable rental upside. It was a rent-controlled building with many tenants residing there for 20+ years. This would appeal to a wide array of investors.
  • We determined the value assuming no deferred maintenance, and then deducted the capital expenditures required to renovate it. The capital expenditures alone were enough to eliminate a large portion of buyers.


Business Plan

We implemented an aggressive, highly-controlled, private marketing campaign to our proprietary database of value-add multi-family investors. The goal was to fully and thoroughly inform prospective buyers of both the real upside that the property offered as well as the challenges associated with it.


Execution

Within two weeks of being granted the exclusive listing, we generated five offers for purchase. All buyers submitted their initial offers, and were countered, each being required to complete their inspections and submit their best and final non-contingent offers. All five buyers complied.


Outcome

The Buyer selected not only offered the best price and terms (non-contingent with immediate release of deposit), but more importantly, he was the most accommodating to the Seller's wish to remain a tenant after the sale, allowing her to do so at a below-market rent. The Seller was happy to be relieved of ownership responsibilities while being able to remain in her home of nearly 72 years. Further, the price we garnered for her building was ±$1.5M higher than that which her financial advisor had specified. We learned later from the seller that her advisor had tried to purchase the building from her on past occasions. The Buyer was elated to purchase a rare value-add investment in an A+ submarket at a fair price

 

 

 

Direct Offer for Fast Close – Palms


Background

The owner of a 20-unit non-rent control building in Palms was looking to quickly dispose of his asset in order to have liquid funds for a business venture. He did not want to exclusively list the property for sale, but he interviewed three brokers, including our Team, before selecting us as his preferred brokerage team to represent his interests and execute the sale.


Challenge

A fast sale with the highest probability of closing was of utmost importance to the Seller. However, due to his involvement in a political campaign, he was extremely busy and largely inaccessible to provide us with the pertinent information we needed to position the property and then advance and complete the sale process.


Strategic Evaluation

Our Team understood that we had to effectively and accurately secure vital property and financial information with minimal assistance from the Seller during the sale process, so we engaged his property management company who had been managing the asset from the time of purchase.


Business Plan

Our understanding of the Seller's priorities required that we move extra quickly. Given the basic information he had initially provided to us, we leveraged our relationships with area investors and our in-depth knowledge of the submarket  to  make a few strategic phone calls to those investors we believed to be the most high-probability buyers of the Seller's apartment building.


Execution

For our very first interview with the Seller, even before he had decided upon a brokerage team with which to work, we came with an excellent offer in-hand; one which we had generated from our phone calls to our shortlist of value-add buyers for the Palms submarket.


Outcome

During our meeting with the Seller:

  • We demonstrated that we understood and appreciated his sense of urgency; hence the offer we presented to him. It was a clean offer with a 10-day due diligence, with removal of contingencies and release of deposit in 10 days.
  • We supported the offer with a property analysis based upon factual market data.
  • We built rapport with the Seller and allowed him to develop a level of comfort with our Team and our capabilities.
  • The Seller was comfortable with our analysis and felt the offer was fair, countering on a few minor terms. We put the property under contract and within 60 days, we closed escrow, successfully accomplishing the Seller's top priority.

 

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