Challenge

A weak industrial market and high vacancy rate made finding tenants virtually impossible. The building had a total of 48,769 sq. ft. with a tenant occupying 10,000 sq. ft. This tenant went bankrupt and vacated the property. A second tenant occupying 20,000 sq. ft. vacated the property and hired a broker to try and sublease its space. A third tenant occupying 10,000 sq. ft. had its lease expiring in six months and wanted to renew. A fourth tenant occupying 3,000 sq. ft. was on a month-to-month lease and vacated the property. The remainder of the property was vacant. The building was losing money, and the owner was looking for a solution.

Services

• Property management
• Intense local marketing campaign to locate possible tenants
• Analysis of the property and lease versus sale options
• Negotiation of a buyout with existing 20,000 sq. ft. tenant
• Final negotiation with the buyer
• Management of due diligence, including survey, environmental and title
• Facilitation of IRC Section 1031 tax deferred exchange for client

Results

After an in-depth analysis, Colliers recommended that selling the property as a whole would be a better benefit to the client rather than holding it as an investment. Colliers worked to reposition the property for sale, initiating an activity increase. A user/buyer was found for the building at market price and a lease buyout was simultaneously negotiated with the existing 20,000 sq. ft. tenant. The remaining 10,000 sq. ft. tenant had no rights and vacated the property at the end of its term prior to closing.

After closing, Colliers assisted Redson Properties with an IRC Section 1031 tax deferred exchange. Colliers found replacement properties within 45 days and was able to close within the 180-day period. Due to Colliers' suggestion to reposition the property, the client's investment increased from a negative cash flow to an 8.5% cash on cash annual return in a diversified tenants in common portfolio.

 back to top