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The Challenge
Sell.
A local investment company had acquired a mixed use commercial real estate property in a major city. The asset was located in a prime market where capitalization rates remained consistently low and so the property generated minimal cash flow. The company saw an opportunity to increase the property value by investing in improvements and maximizing the underlying rents. All of the commercial and resident units were then renovated, and a lease-up concluded quickly with new tenants contracted at optimal market rates. The increase in rental revenues and the corresponding increase in the net operating income helped the property appreciate to almost twice its original value.
The company tasked Beplace to propose and execute a disposition strategy that could unlock the property value. We recommended pursuing a sale of the property and an investment of the net proceeds using a 1031-exchange vehicle in order to defer the capital gains taxes. The company accepted our proposed strategy and Beplace helped the company contract with a formidable regional brokerage firm to sell the property. The property was marketed and subsequently sold.
The Solution
Finance.
The company was now subject to a legal time constraint. A 1031-exchange transaction required the company to identify replacement property within 45 days from the date of the sale of the relinquished property, and then to close on the purchase of any of the identified properties within 180 days from the same sale date. The company had expressed interest in acquiring multifamily commercial real estate assets. Beplace engaged sellers and brokers for on- and off-market properties and opportunities. We reviewed and analyzed offering memorandums and property financials, and recommended to the company several opportunities that became the list of identified replacement properties.
We helped the company contract a global commercial real estate services firm to obtain financing for the acquisition of the replacement property within the 180-day timeframe mandated by IRS regulations. The company also engaged Beplace to help prepare, complete, and close the transactions. Beplace analyzed factors such as location, property type, and planned dispositions in order to create a base framework that was used to filter potential lenders. We also conducted lender research to identify ready, willing, and able lenders. We then used curated lender checklists to collect and organize due diligence document packages which were submitted to prospective lenders. We checked for status updates, and reviewed lender term sheets, third-party reports, and draft and redlined lender documents to help prepare for a timely closing.
The Result
Buy.
Complex negotiations with multiple parties across the identified replacement properties led to delays that threatened to jeopardize the closing of the transactions by the 180-day deadline. Beplace proposed and executed an emergency strategy that concluded the negotiations for the properties that were preferred by the company. The company was able to use our services to achieve a financing experience that resulted in the closing of the loans, the acquisition of the replacement assets, and the satisfaction of the 1031-exchange transaction.
* Beplace includes agents, directors, employees, managers, owners, or other stakeholders of Beplace whether individually or through Beplace.
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