Experiences buying multifamily at discount to break-up?
I'm looking at a deal to buy a tenanted portfolio at 35% discount to break up value as the first deal on my own. I'd love to hear experiences form anyone who has successfully (or unsuccessfully) as well as any horror stories / lessons learned!
How sure are you that your break up values are correct?
Fairly confident but hard to know. It's not a super liquid sub market. I'm assuming the break up value is c.15% below most recent sales in the block. That's still giving me an entry of 35% discount.
Ok. This is the most common mistake I see in this strategy
Yeah, for sure. It's ultimately the only value driver so I'm acutely aware I need to be conservative on it. Have you done this type of deal before? If so how did it go and anything you learned in the backend you didn't realise going into it?
Not exactly like this but several years ago we bought a portfolio of Class C industrial buildings from an owner/user that was going out of business. Put a lot of capital into the buildings to bring them up to more like class B and then sold them piecemeal in 2018. All the buildings were in different markets. CapEx required was often 1.5x-2.0x what we budgeted. Values on the back-end slightly exceeded our expectations however. It ended up being a solid deal. We tried to do similar stuff in recent years but were unsuccessful. A competitor ultimately won a similar deal later in 2021/22 but missed on the exit values and now that deal is ded.
Are these same sub market or random collection of Ohio, Kansas and Plano assets
same sub-market. All in the same building
I’ve tried offering 50% discounts off the listing price to boomers selling their homes that have appreciated 400% since they bought it. This is a good reminder I need to start trying the same with commercial properties too.
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