The Challenge

Former Union 76 gas station site; main entrance pad to Serramonte Center (major regional power center, premium Bay Area Peninsula location). Subject property was the only pad not owned by the REIT that owns Serramonte Center; REIT offered to purchase the subject property for $5M ($221/PSF – land value). While the subject property was “clean” from an environmental standpoint (owner was in possession of a “No Further Action Letter” and “Tank Closure Letter”), the fact that the prior use was a gas station presented environmental challenges to be addressed no matter how the site was redeveloped and to whom it was leased or sold.

Our Approach

Advised client to find a tenant and determine if ground lease or build to suit option would maximize disposition value versus an outright land sale. Fully negotiated Verizon Wireless corporate lease on behalf of the client, including overcoming significant environmental, construction/delivery, over-market rent, and city-related issues. Provided fee development oversight to ensure entitlement, building department, and construction matters were in sync with tenant’s timing/expectations. Marketed the property for sale prior to construction being complete and tenant accepting delivery of the premises (creative marketing and deal structure).

The Challenge

At the time of sale, the site was encumbered by a vacant 1,050,266 square foot warehouse building that was previously occupied by the U.S. General Services Administration. The facility was built for the GSA in the early 1990's. The main challenge was figuring out how the investment community was approaching the purchase of the building and site, and how we could maximize pricing based on that. Investors fell into two (2) categories: (1) knock the building down and construct new Class A modern warehouse/distribution product on the site; (2) lease the current facility to a new tenant and construct one (1) new building on the excess land located on site.

Our Approach

The buyer, which was a joint venture between Clarion Partners and MRP Industrial, decided that the way to maximize the value of the site was to knock the 1.0 million square foot building down and construct brand new, modern distribution space on the site. The capital markets team was able to procure the highest $/FAR pricing in the history of the Southern New Jersey industrial submarket, based on the buyer's initial estimates regarding the amount of square feet they would be able to build on the site.

The Challenge

Assist a long time owner of industrial property and Class B residential rentals in determining and implementing the most profitable strategy to turn a warehouse into a mixed use building on the Brooklyn waterfront. The potential scenarios included:

• Sell the lot to a developer and re-invest the proceeds in other areas with greater returns
• Secure a construction loan and construct a property, something they had never done before
• Create a joint venture with an experienced developer and building
• Structure a long-term leasehold where the new lessee spends the money to construct a building in exchange for 99 years of control

Our Approach

In the belief that they could develop a 90,000 sq. ft. building on their own, ownership hired an architect, drew up plans and went to their primary lender of over 30 years for a construction loan. While this bank had provided well over $200M in debt over the decades, the loan that was offered reflected a total lack of experience in ground-up development. The loan proceeds were materially lower than anticipated and the interest rate was double what experienced developers were able to achieve. Ownership needed guidance on how to achieve their goals of developing an economically viable and more valuable, mixed use property, taking advantage of 421-a tax benefits to minimize the tax liability for a quarter-century, constructing a rental asset that could be passed down to the next generation of this family ownership, and securing a market rate loan to ensure that the potential returns outweighed the construction risk.

We instantaneously recognized the superior location of this asset, which given its waterfront location would have unobstructed East River and Manhattan views in perpetuity. We quickly assessed the balance of the positive and negative attributes of the property and opportunity, and determined that a Joint Venture with an experienced developer offered the highest percentage chance for success. In order to create the JV, current ownership would need to “sell” a piece of the fee, approximately 10% to 20%, to make the project worthwhile to a new partner and show potential lenders that the minority partner had substantial skin in the game. We also believed that given the competitive advantages this property would eventually have, a new partner would accept a land value above what would be a market rate for a rental building, but still a discount from a condo valuation.

After speaking with a handful of very select developers, all with at least 30 years of experience in the industry, and some with over 100 years, we made a minor course adjustment. These developers all stated that because they still had to hire a third-party general contractor, the returns were not great enough. It was at this point we decided to “cut out the middle man” and source general contractors who were also property owners, and had enough liquidity to buy into the property and meet a potential lenders requirements. We were able to locate the appropriate group from our deep bench of relationships, and they agreed to our aggressive land value. They were about to execute the partnership agreement when 421-a expired, creating a major tax liability that could not be overcome without cutting the land value in half. Ownership decided to shelve the project until 421-a could be revived or a new tax incentive program created to minimize and freeze the real estate tax burden long enough for the project to make economic sense.

The Challenge

The main challenge was getting the deal across the finish line in the midst of the COVID-19 pandemic. Many companies are either 100% work from home right now or are asking their employees to commute into the office in shifts. There is uncertainty regarding when employees will return to the office on a full-time basis. Both the buyer and seller were flexible during this uncertain time, which allowed the deal to get done in a timely and efficient manner. The seller was flexible in terms of understanding their tenants' concerns dealing with the pandemic, while the buyer was creative regarding their deal structure from both an equity and debt standpoint. Overall, despite a few bumps throughout the due diligence process, the deal was able to be completed on time.

Our Approach

The team's approach was similar to how we typically market a suburban office deal of this class and tenant profile. We marketed it to the top investors in the area, specifically within the particular submarket, received a handful of offers, and subsequently pushed bids to the highest achievable price. The largest tenant at the building, who leases over half of the rentable square feet, extended their lease term for over 6 years during the marketing process (through 2031), which allowed us to sell the story about the anchor tenant occupying space at the facility on a long-term basis. This allowed us to push pricing even further.

The Challenge

After launching the marketing and sales effort of this asset in late 2019 and running a typical bidding process, we selected a buyer and went under contract in February 2020. Then, COVID-19 hit the US causing the most abrupt and major economic recession since the 2008 financial crisis. Unfortunately, the buyer had not completed its due diligence prior to the national "shutdown" that ensued, and ended up canceling the sale contract in March 2020. After a 90-day hiccup, the same buyer came back to the table and began conducting its due diligence. During due diligence, the buyer ran into significant challenges, namely from his preferred equity and debt sources, who had significantly tightened their grip on new investments and lending criteria in a post-COVID environment.

Our Approach

Given the immense challenge presented to the market in COVID-19, the Lee & Associates team remained nimble, working through the hourly/daily informational updates relating to COVID-19, and "shutdown" orders that were enforced at the state, and ultimately national, levels. Meanwhile, the tenant that occupies 100% of the Property, Thermo-Tech Premium Windows and Doors which is a wholly-owned subsidiary of Harvey Industries (Waltham, MA), showed tremendous fiscal and operational health post-COVID. Without this, the likelihood of closing this transaction at the agreed upon terms was extremely unlikely.

The Challenge

The 6th & 3rd project is the second North Loop/Warehouse District (Minneapolis, MN) transaction in nine months for our client, CEDARst Companies ("CEDAR"), a prominent multi-family developer based in Chicago, Illinois. The 6th & 3rd properties are located one block from CEDAR's first project, "The Duffey Lofts" site which land acquisition closed in July 2019, providing an excellent opportunity for CEDAR to scale its operation in the Twin Cities by more than 3.0x. The acquisition of the 6th & 3rd properties did not occur without headwinds. Primarily, the spread of COVID-19 into the US in February/March of 2020 and the economic shutdown and recession that ensued, posed a major challenge to the transaction. As a result of COVID-19, lenders across the nation turned off the spigot for making new loan commercial real estate loans. Additionally, private and institutional equity sources were rattled creating a "cash-is-king" mindset, not knowing if, and how long, an economic decline would last.

Our Approach

Lee & Associates provided ongoing brokerage and transactional support to CEDAR in a variety of ways. The Team was successful in raising equity capital and relational support to multiple local/regional lenders who, through the Team's local market knowledge and expertise, were still actively pursuing new loan financings despite the economic disruption caused by COVID-19. Due to state-to-state travel bans leading up to closing the 6th & 3rd, it proved critical to have local boots on the ground to allow for social-distanced contact with the seller, City and neighborhood leaders, investors, third parties conducting due diligence, and other points of contact necessary as part of the transaction.

The Challenge

Far from a traditional limited service hospitality asset, The McCarrren Hotel and Pool was an independent lifestyle concept. At the time of the assignment, the food and beverage program encompassing the rooftop and ground floor restaurant was losing a significant amount of money in comparison to room revenues. Despite a great location in a blossoming lifestyle market in Brooklyn, past attempts at efficiently monetizing all of the amenity space was a challenge.

Our Approach

In preparation of bringing the asset to market, the Investment Sales Team performed a complete analysis of all spaces included in the asset encompassing rooms, amenity space, and on-site parking to identify if there were any underutilized spaces that could generate additional income given highest-and-best use. An extensive financial and market analysis found that in addition to the food and beverage space, due to market demographics, the parking was underutilized on an income per square foot basis. The team formulated a business plan to convert some of the parking to expand the potential of a more expansive food and beverage concept and was able to generate close to $1,000,000 in additional income on a proforma basis after a moderate capital improvement program.

The Challenge

The main challenge was driving the pricing to the highest achievable level that was acceptable to ownership while also balancing ownership's timeline for closing as well as the buyer community's timeline for closing. Ownership had done a lot of background work after originally purchasing the site, as they took the site through the township approval process (approximately 1 year time frame) in order to maximize their pricing when they wanted to sell the parcels. The marketing of the site was done in conjunction with ownership obtaining final approvals/entitlements from the township in order to construct a 300,700 SF modern warehouse/distribution facility, meaning that certain milestones still had to be achieved while the site was being marketed so that the Capital Markets team could push the buyer's pricing to the upper echelon of what was achievable based on other recent sales in the market.

Our Approach

Lee & Associates of Eastern Pennsylvania's Capital Markets team was tasked by Foxdale Properties with selling a land site consisting of two (2) parcels that they owned in Florence Township, NJ. Ownership took the land through the entitlement/approval process with the township prior to selling, where they received final & unappealable approvals for the construction of a 300,700 SF, Class A industrial warehouse facility.

The team's approach consisted of contacting every major industrial developer on the East Coast in order to effectively market the opportunity. Interest in the opportunity was extremely strong, as the site's premier infill location combined with its last mile delivery capabilities and immediate development potential in a rapidly growing submarket attracted a top group of bidders that included various public REIT's and private equity developers.

The Challenge

The client owned a 12,000 SF single story retail building that had been leased long term to a grocery store and a laundromat. A fire in the building compromised the structure but the tenants wanted to keep their businesses in this location. Given that they were good tenants, the owner wanted to give them a new space. However, with 85,000 SF of air rights it did not make sense to build another single story building on the lot.

Our Approach

After analyzing and considering various possible structures, it was decided that the best route for the client was to sell the property to a developer but keep the rights to the retail space at the base for their tenant to occupy. This meant that the developer would get the rights to 65,000 SF of space above the retail/community facility but they would have to build the entire building.