Wealth Creation through Development
Tripled Client’s Initial Equity
- Sold management intensive apartments
- Acquired income investment with upside potential
- Entitled 155 unit mixed-use project
Challenge
Client desired to move away from management intensive apartments and into a local investment with more upside potential and in-place income. Client’s objectives were to reduce management obligations, maintain income and increase opportunities to build wealth.
To execute client’s investment strategy, MRE brought to market two North Berkeley apartment buildings totaling 28 units. The marketing campaign leveraged eight competitive offers to achieve the upper limit of pricing expectations. Results generated net proceeds of $3 million.
Execution
MRE’s next task was to source, negotiate and close on a local investment with cash flow and upside potential. The Berkeley Honda property had been on the market, with buyers reluctant to take on a special use property with near term lease expiration.
MRE’s local market insight determined the likelihood of Honda maintaining occupancy beyond its lease term. MRE also identified future mixed-use development potential for the site. The property was purchased for $6.5 Million with an annual levered cash on cash return over 9.0%.
To unlock the development potential, MRE identified, assembled and led an entitlement team. MRE’s leadership culminated in unanimous City Council approval to construct 155 residential units over ground floor retail. During the 7 year entitlement process, the team executed strategies to overcome neighborhood opposition, historical preservation, demands for lower density and overlapping zoning districts. MRE added additional value to the project by negotiating a 15 year lease with Equinox Health Club on 30,000 sf of ground floor retail.
MRE sold the entitled project to Lennar Multi-Family for $12 million. Occupancy and cash flow were maintained during the entire hold period. Client’s net proceeds of $8.5 million represented a 2.83X equity multiple on their original investment. Further, MRE facilitated an exchange of proceeds into a new value add shopping center investment.
Results
Achieved client’s objectives through managing multiple, varied and complex transactions over a 7 year period. MRE’s leadership resulted in client nearly tripling its original $3 million equity.