Highlights
- Successful sale of a 5-building industrial portfolio valued at $12+ million
- Complex negotiations and creative financing involving owner financing and competitive terms
- A unique “rolling domino effect” structure for transactions, involving multiple properties and timelines
- Leveraging a network of buyers and brokers to close a deal despite challenges
- Value-added by repositioning assets with entitlements and permits already in place
- Enhanced market value and long-term upside through strategic leasing and management
Challenge
The journey began when Mayhugh Commercial Advisors presented a raw land development opportunity to the buyer, initially focused on creating a new industrial development. The buyer, with our advice, engaged a Civil Engineer and acquired all necessary entitlements and permits to break ground. However, after securing permits and engineering plans, the buyer realized that the development costs and timeline might outweigh the potential return. With $3.6 million to roll into another project, the goal shifted to securing an income-producing asset.
This led to the acquisition of a five-building industrial portfolio. The primary challenge lay in arranging financing for a deal with limited cash flow but significant upside. Additionally, the buyer needed to manage a complex, multi-step transaction that included securing owner financing, negotiating a lower purchase price significantly down from asking, and aligning various timelines for multiple properties.
What We Did
Mayhugh Commercial Advisors first got their client into a vacant land investment opportunity, at a great value price. From the onset, the plan was either to flip out of it or develop. Over 18 months, all entitlements were acquired but at the same time, there was a rapid increase in demand from other owner-users. Once the client decided not to pursue the development, the strategy shifted to rolling the capital from the land sale into a 5-building industrial portfolio. To overcome financing challenges, we creatively arranged owner financing with competitive terms, which allowed the deal to proceed despite high-interest rates and difficult market conditions.
During the transaction, we also faced a setback when the initial buyer withdrew, but through our extensive network of buyers and brokers, we were able to quickly source a new Buyer. Throughout the entire process, we negotiated favorable terms on the portfolio, securing a competitive purchase price, and positioning the client for significant upside through strategic leasing of the properties.
Result
The final deal was a successful portfolio acquisition, with a sale price of $12 million and a cap rate of 7.5%. While the initial yield was lower, there is considerable upside potential in the portfolio, with rents expected to rise within 18-24 months. The client was able to transform “dead money” into a high-potential cash-flowing asset, mitigating risk while positioning for future returns. The portfolio was fully entitled and ready for development or repositioning, which added immediate value. Ultimately, the transaction was completed within eight months, showcasing our ability to navigate complex negotiations and align multiple moving parts for a seamless outcome.
The Trusted Partner
The client trusted the broker’s judgment throughout the process, confident that the right decisions would lead to success. This trust was built on past successful deals and strong relationships with both buyers and brokers. Our firm’s reputation for delivering results allowed the client to focus on the bigger picture while we handled the complexities of the transaction. The deal represents another example of how our firm consistently delivers for clients through creativity, expertise, and a well-established network.
