VALUE-ADD REPOSITION OF OBSOLETE OFFICE

[Don Pearson]

Investment Info:

Office Space commercial investment investment.

Purchase price: $10,900,000
Sale price: $13,825,000

Built, and marketed “Creative” office improvements to attract progressive office users from the downtown SD, Mission Valley, and Point Loma markets. Building previously “black-listed”, deemed “too tired”, and obsolete by the brokerage and tenant community.

Through strategic sourcing, we completed a high-style “creative” office design for nearly ½ the cost of competitive landlords. Increased occupancy from 60% to over 95% in just 6 months. New lease rates increased from $1.75 to $2.65 psf.

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

-Location, Location, Location
-Path-of-progress deal
-Opportunity to fulfill demand for "creative" office space where none existed at the time

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

Broker relationships

How did you finance this deal?

Combination of CMBS debt and private equity

How did you add value to the deal?

See description above

What was the outcome?

-Turned a blighted and forgotten building into a jewel-box investment.
-Sold as part of a larger portfolio sale.
-Sold for significant profit and return to investors.

Lessons learned? Challenges?

-Identify the highest-and-best-use given the current improvements, economic environment, tenant demand, and cash on hand.
-Brokers want an "easy" deal. Build something with some sizzle that's easy to sell!!