Jolly Cedar Plaza is a 68,000sf retail center in Lansing, MI. The property was leased to six tenants with additional income from signage and parking. There was value add potential with 6,778 sf available for lease. Situated on a 7.5 acre parcel, the property was offered at a cap rate of 10.5% on current rents and a price per foot of $52. This 1960’s built property is in good condition with a roof less than 5 years old. We were contracted in early 2008 as the exclusive brokers assigned to market and sell the asset.

The Jolly Cedar transaction represented a significant challenge to sell given a number of factors. First, was timing, the property was located in the heartland of the defaulting auto industry in Detroit, MI. Additionally, the asset was marketed and went into escrow during the third quarter of 2008, when the great recession hit. Lastly, the local market had seen a 24% loss in population in a 10 year span. We overcome these obstacles by addressing the positives of buying an asset at a time of such distress in the marketplace and by having exceptionally strong marketing material which outlined the yield of the asset, the yield versus the local assets and the upside potential of the asset.

The next significant hurdle was that most local investors were in a defensive stance, trying to hold on to buildings they currently owned from the extended down cycle the region had seen, versus seeking out new investments. This we thought was too big of a hurdle to overcome. We elected to market the asset to out of state owners. More specifically, national commercial real estate websites were utilized in addition to weekly advertising in the Wall Street Journal. Through these avenues, we generated interested parties and with the presentation of a thorough marketing package, explaining the benefits of investing in this asset.

We were able to generate three offers in the initial 45 days of marketing. One of the offers, an out of state real estate syndicator, and this group was the most aggressive in seeking to acquire the property. Through extensive negotiations, several trips to the property and due diligence, the buyer elected to step up to the seller’s asking price to consummate the deal. As escrow was opened, due diligence conducted, the buyer met a number of hurdles in getting financing for the transaction. Most significantly the buyer’s timing mirrored the fall of Lehman Brother’s and other banks nationally as the banking industry went into a complete freeze. The solution became third party financing which was not on the table. The buyer, seller and brokers went into further negotiations for seller financing. Upon reaching a suitable conclusion for the LTV and terms of the financing, the buyer moved ahead with closing.

This transaction spanned the length of over one year and the result was a successful closing through unimaginable challenges and a final closing price of 88% of list price.

Our initial meeting with the owner of the 8 unit apartment building, Dennis Prout, was in 2003. He owned an 8unit apartment building in Glendale, CA. The property was underperforming for him and he thought the equity could be better utilized. We were able to market the 8unit property to several investors and generate an offer $40,000 higher than other offers Dennis had received. The escrow was relatively simple, however concluding the 1031 tax deferred exchange was not. We were able to locate a 25unit apartment building in Glendale for Dennis to purchase. The escrow took in excess of 90 days to close. Our challenge was getting financing in place to support the 73% LTV Dennis needed to close the transaction. Working with a competent commercial loan officer who had performed for us before, we were able to conclude the transaction. Dennis effectively tripled his portfolio size in that one transaction.

Almost four years later, and after a downturn in the Southern California’s apartment market, working closely with Dennis, decided to market to sell his property to move the equity out of state. We were able to market the asset to local investors, generate and ultimately negotiate an acceptable offer, work through further due diligence and close escrow. Lastly, after many conversations with Dennis, we elected to focus in on the state of Texas for reinvestment of his equity due to the state of the housing market, booming economy, and demographics. Within a short period of time we were able to focus in a few investment opportunities.

4300 Rosslyn Rd. in Houston Texas. This apartment building was formerly owned by a local family and represented a value ad opportunity.

417 Withers St. in Denton, Texas. This apartment building was in close proximity to several universities and represented a stable asset.

1490 Forrer Blvd. Dayton, OH. This was a retail building on a very large plot of land with a U.S. Post Office as a tenant. Additionally, Dayton Ohio represented a very dynamic market to invest in.

13480 S. Thorntree Houston, TX. This was a former condo complex, converted to for rent housing. Additionally, the units could be sold off as individual condos at any time.

Overall, Dennis doubled his equity through the sale of his 8unit building and repurchase of the 25unit apartment buildings. Furthermore, he avoided a substantial downturn in the Southern California apartment market by selling his 25unit apartment building and purchasing four out of state assets. Additionally, he increased his overall cash flow by 30%+.

The Main St. property was sold as a value add opportunity because of its 30% plus vacancy factor. The tenant mix consisted of mostly post production studio tenants and some light manufacturing tenants. The property had previously been on the market by a national commercial real estate firm for over a year with no acceptable offers.

Our challenge was to discreetly market the asset to qualified buyers and to generate an offer within a 30 to 45 day timeline so the asset did not become a stale listing as it had become in the last marketing campaign. We accomplished this by taking several approaches. First, prior to bringing it to market, we exposed the asset to local owners and individuals who had purchased office and industrial buildings in Burbank within the past two years. Second, we advised the seller to market the vacant space through a local national leasing brokerage house (our focus was strictly investment sales at the time and we did not do leasing) and we felt by simply leasing up a small portion of the vacant space we would create enough synergy for a potential buyer to appreciate that the true upside potential can be realized. Lastly, the seller agreed to guarantee the rents for the majority of the vacant space. By guaranteeing these rents for a one year period, the seller impounded a relatively small dollar amount at the close of escrow for the buyer and in return received a value far greater than the impounded dollar amount because the rents he guaranteed were capitalized at the 6.5% yield the asset was on the market for significantly increasing the current value of the asset.

The leasing brokerage company generated an letter of interested for a small portion of the vacant space (approximately 2,000 square feet), this was immediately communicated to the brokerage community. The results, an offer was generated shortly after by an owner who had purchased an industrial asset recently. The final negotiated price represented a value of 92% of the list price. The buyer and seller moved forward and we were able to close the transaction a short time later.