From Hot Dogs to Coffee Beans

[Tyler Graffigna]

Investment Info:

commercial investment investment in Oakland.

Purchase price: $680,000
Cash invested: $210,000
Sale price: $4,000,000

Historic retail space sees new life as a flagship coffee shop after 30 years of vacancy following the closure of Doggie Diner.

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

I knew the property was distressed and what the future plans were for the neighborhood. I also owned a residential unit in the same building so I believed that developing the space would help increase the value of my residential unit.

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

I was referred to my partner by a mutual acquaintance. I told him I was looking to invest in the Uptown neighborhood of Oakland and he knew someone who was looking for an investor. It turns out we sat on the same HOA board together and it took a mutual third party to bring the two of us together.

How did you finance this deal?

I used my retirement funds for my initial investment and I used a small cash deposit and a promissory note to buy out one of the partners on a subsequent round. The builder/developer carried the note for the acquisition and we used a hard money loan for the renovation.

How did you add value to the deal?

I was the investor and provided financial and legal guidance. The big value add came when we secured the tenant. A signed lease agreement from an A-credit tenant was all that the hard money lender needed to lend us the money for the renovations.

What was the outcome?

We leased the property to Peet's Coffee for 20 years NNN. Sold property one year after tenant took possession at a CAP of 3.875%.

Lessons learned? Challenges?

Things can and will go wrong with every deal whether it's time delays, partner disagreements, or funding challenges. I learned to focus on solutions instead of lamenting the problems. The more people I shared our challenges with, the more solutions came our way from sources we did not expect.

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

We used different agents for the acquisition, lease and sale. Each one had different strengths. Collier's International helped us find the perfect commercial tenant. Preserve Capital West helped us find the perfect buyer who was in the early stages of a 1031 exchange.