How the Deal Went Down
Brokering commercial real estate transactions is an interesting business. There are so many circumstances and parties involved that we never know what to expect from deal to deal. This we do know for sure: every deal will have some “hair” on it, whether it’s from the property or one of the parties to the transaction. Whatever it is, we usually find a way to resolve it and get the property sold. Below is a synopsis of some of our more interesting deals.
33 Units in Alameda
We encountered a common brokerage trick from the Buyer and Buyer’s agent, a large, well-known investment brokerage that will go unnamed. Essentially, they tied the property up at full price, then tried to re-trade the deal based on findings from their inspection. Despite having advertised the property as a “Repositioning, Value Add Opportunity,” this buyer and his agent tried to get a $750,000 price reduction based on overall condition including the electrical system. This is a common practice in commercial real estate: Tie it up, then drive it down; Otherwise known as “Ground ‘em and Pound ‘em.”
We were aware of the tactic and did engage in some reasonable negotiation, which resulted in a sizable price reduction. The Buyer and his agent, however, tried to get more and ending up losing the deal. This not being our first rodeo, The Seller and I didn’t play that game and the released the Buyer. I then took the property back to market and procured two other buyers and put the property back in contract at a price acceptable to the Seller. That transaction closed without incident and on schedule.
Then end result? Seller was happy with the transaction, the new buyer got a great property at a very good price, and the first buyer and his agent were left pounding sand.
16 Units in Campbell
This was one of those deals that brokers love. I received a call from a client with whom I had conducted a 1031 exchange more than 10 years ago. The time had come to sell their multifamily building and end their relationship with the Tenants, Toilets and Termites. In essence, they had reached their limit of managing multifamily properties and wanted an easier but stable property to manage, that generated income.
The Seller had asked that the deal be done “under the radar” or off-market. They did not want their tenants or the general brokerage community to know about their interest in selling the property. They did not want to receive a flood of phone calls from agents looking to list or sell the property, or having to explain to their tenants their reason for selling.
Since this was a value add property the Seller agreed to price it accordingly and I was able to quickly procure a buyer who agreed to provide the Seller with ample time to find an upleg. Once the price was agreed upon (very close to the list price), we drafted the contract with hard money deposits and options for the Seller to extend as necessary to find a suitable 1031 exchange upleg.
The upleg, a newly constructed DaVita Dialysis site with a 15 year lease and cap rate higher than their Downleg, was located in just a few weeks, and the Seller was able to secure a property with lower maintenance requirements and higher cash flow than their multifamily Downleg. And since this was a buyer with whom I had worked with before, the transaction went smoothly with no problems and closed as scheduled.