Retail Strip Center in Chattanooga

[Brian Levredge]

Investment Info:

Retail commercial investment investment.

Purchase price: $1,000,000
Cash invested: $400,000
Sale price: $1,950,000

Contributors:
Jeffrey Holst

31k sq ft retail strip center that was on a ground lease.

What made you interested in investing in this type of deal?

The price was great and there was a ground lease that gave us upside.

How did you find this deal and how did you negotiate it?

It was a pocket listing. The seller was anxious to sell since she was out of market and would take a big discount off the list price. There were also 21 years left on the ground lease at the time, which was held by a different owner. While we were in DD we renegotiated a new, 60 year ground lease with a first right of refusal over the entire parcel which included two other buildings (Autozone, lender) and a billboard.

How did you finance this deal?

Bank financing and equity raise

How did you add value to the deal?

We leased up vacant units.

What was the outcome?

Sold it less than three years after buying it for almost double what we paid. Investors received north of 30% IRR.

Lessons learned? Challenges?

Tried to do leasing on our own for the first six months. That was a waste of time and set us back. We also leased out two of the units right at the start of the pandemic. We redid one lease to shift the start date but ended up evicting the other tenant, who was simply trying to take advantage of the situation.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes.