547 Valley Road - Value add mixed use suburban acquisition

[JD Cohen]

Investment Info:

Large multi-family (5+ units) commercial investment investment in Montclair.

Purchase price: $1,350,000
Cash invested: $644,000

Asset is 5,380 SF with a mix of 3 retail + 2 Tudor style residential lofts, and 3 storage units • High foot traffic area down the block from the Upper Montclair Train Station with direct lines to New York City • Located less than a mile away from Montclair State University – 21,005 total enrolled students • First sale of the property in over 60 years
HREA/Cohen Capital Business Plan: • Increase the in-place, below market rents to market once the leases expire • Lease the vacant store in the short term – HREA/Cohen Capital has agreed upon terms with a 90’s clothing brand to do a pop-up upon closing and negotiating with a tenant to take space once the pop-up’s lease ends

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

I was interested in this deal because it seemed like a solid deal per pound in an very stable market.
Montclair NJ has a mean income of 150k per household making it one of the wealthiest towns in the state.
The asset is 35 minutes away from my apartment in Manhattan giving me and my investors comfort.
1/3 of the partnership equity was provided by property manager and his family - something that always gives me comfort.
the asset is 1 mile from Montclair state university

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

This was a listed deal we found and were the first to tour - it was an estate sale and we got it into contract for less than it was worth because it was may of 2020 - peak covid discount.
We were also able to achieve a better price because we allowed the seller to remain in her unit on a 1 year lease with a 1 year option

How did you finance this deal?

a local bank called Kearnys financed it at 65% LTV and my partner signed a PG getting us a decent rate in this climate - we intend to refinance in 4 years.

How did you add value to the deal?

I am personally going to be handling the leasing of this property - it is my trade at Newmark and I was able to bring my cousin into the deal to open up his pop up clothing brand until we find a real tenant giving us an instant NOI boost.

I brought $75,000 of equity to the table and raised $250,000 from investors

We are also going to be renovating the residential units in 2 years when the leases turn

I have vast experience negotiating commercial lease renewals and expansions

What was the outcome?

I got to own 25% of partnership that is actually going to be worth my time that I can directly add value to doing what I do best

Lessons learned? Challenges?

In the future I aspire to do larger deals.