Comments (79)

Jul 28, 2015

Bump... C'mon guys, I know you have some good ones :D

Jul 28, 2015

I don't know how profitable it was but I can tell you one of my favorites which I often point to as a text book adaptive reuse / mixed use development is the American Tabaco Campus in Durham NC. which was an old lucky strike factory in the heart of NC's Tabaco country, redeveloped into MF, retail, office complex while keeping the character of the old factory (the lucky strike water tower and old cogen plant are still there).

Anyways its pretty neat considering its not in the middle of a large city.

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Jul 28, 2015

The Wang Computer building in Lowell MA. In the early 90's Wang went bk and left the building which was over 1MM sf. A group of Boston guys bought it for something like $500k, got the city of Lowell to give it tax breaks and the city signed for a few million dollar line of credit to rehab it. They leased it up and sold it a few years later for ~$100MM.

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Jul 28, 2015
Dingdong08:

The Wang Computer building in Lowell MA. In the early 90's Wang went bk and left the building which was over 1MM sf. A group of Boston guys bought it for something like $500k, got the city of Lowell to give it tax breaks and the city signed for a few million dollar line of credit to rehab it. They leased it up and sold it a few years later for ~$100MM.

What kind of company did they lease it to?

Jul 28, 2015

Related building a whole neighborhood over the train tracks in Manhattan is pretty ballsy.

But, as far as someone I've actually met, I know a REIT that buys property from hospitals (a lot of times whatever real estate the hospitals own outside of the core building) and then immediately leases it back to them. The hospital gets cash and the REIT gets steady rental income and an obvious tenant. Pretty brilliant if you ask me.

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Jul 29, 2015
CRE:

I know a REIT that buys property from hospitals (a lot of times whatever real estate the hospitals own outside of the core building) and then immediately leases it back to them. The hospital gets cash and the REIT gets steady rental income and an obvious tenant. Pretty brilliant if you ask me.

No offense, but this is not clever or amazingly profitable. It doesn't really matter if the seller happens to be the hospital or happens to be another REIT; they're gonna have to buy it at a single-digit cap rate with the expectation of long-term capital preservation and stability. It's not like the hospital is cutting them a special bargain.

Jul 28, 2015

Shrug

Yes, but I still thought it was a cool niche. It's also profitable enough.

Jul 29, 2015

Agreed with Prospie. Also hospital systems are smart. They will often times only do a ground lease and not a full sale. Even in a full sale, hospitals are not the most trustworthy. For example, I know a group that was nearing the tail end of their 15 year lease with a hospital system. They should they were going to get a renewal, but the hospital notified them that they will not be renewing and instead got a developer to build them a brand new facility literally across the street. If a hospital knows that they don't plan to be in that building in 15 years, then they will sign a lease for 15 years, collect the proceeds, and peace when it expires. When this happens, good luck finding a tenant to lease the hospital too.

Mar 22, 2018

@CRE: Can you share the name of this REIT?

Jul 28, 2015
feeguy:

@CRE: Can you share the name of this REIT?

I want to say Healthcare Realty Trust in Nashville. I posted that 3 years ago though so I'm not sure if that's still an on-going strategy or not.

Jul 28, 2015

A piece of property in Ocean City, MD adjacent to the water had a deed restriction placed on it in the 1960s that restricted the property's use to a squash club. The then-current owner (this is 2012) put the property up for sale, a hotel developer went under contract for the property for something like $1 million, tracked down the last living relative of the individual who placed the deed restriction on the property, paid the guy, like, $500,000 to remove the restriction, which was accomplished within the 90 day settlement period, and the then-unrestricted land appraised for something like $8 or $10 million. Immediately upon settlement, the new owners put the land up for re-sale. I pretty much wanted to kill myself when I saw how easy this was for them.

Jul 28, 2015

Hah, that is fantastic.

Jul 28, 2015

Hah, on the other side, I also know one of the developers of Pittsburgh Mills mall. While he got out at the right time financially, and to his credit it IS a gorgeous mall, there are barely any stores there now and the mall is leasing most of its space to a community college, a karate studio, a church, etc. Malls, man. Unless they're super high end, I wouldn't touch them with a 10 foot pole.

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Jul 28, 2015

The majority of malls I know are exactly what you're saying: karate and churches. Crazy.

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Jul 28, 2015
UTDFinanceGuy:

The majority of malls I know are exactly what you're saying: karate and churches. Crazy.

I genuinely think there's a place for malls, but not "malls" as we in our 20's and 30's remember them growing up. High end malls, where you have Omega instead of Claire's and Burberry instead of American Eagle are doing well, and urban outdoor malls, in contrast to the standard Taubman indoor design, are starting to pop up. I read about a cool project Ratkovich is doing in LA ( http://www.theblocdowntown.com/ ) that is more or less a mall.

In ancient Greece, the Agora was a marketplace and meeting place that represented the cultural heartbeat of every major city. THE BLOC, which occupies an entire city block in the heart of resurgent downtown Los Angeles, will be a modern version of the ancient Agora, a vibrant and eclectic cultural and commercial destination that will be a magnet for both locals and visitors from around the world. The Ratkovich Company, the property's new owner and developer, is transforming the almost 2 million square foot property into an international destination to lead an accelerating Downtown LA renaissance. Bounded by 7th, 8th, Hope and Flower Streets THE BLOC will include a state-of the art European Standard 478 room Sheraton hotel, a fully updated 250,000 sf Macy's Department Store, over 150,000 sf of unparalleled retail shops and restaurants surrounding an open-air, multi-level public plaza, and a fully renovated 33-story, 700,000 sf office tower with rooftop garden lounge. When the original buildings at "Broadway Plaza" were completed in 1973, the architect, Charles Luckman, referred to his truly mixed-use development as a "totally integrated environment". He felt he had truly created something to be enjoyed by everyone. Times have changed and The Ratkovich Company is turning the formerly inward focused mall into an inviting world of commerce and culture that is fully integrated with the downtown community.

The existing mall roof will be removed, opening the three-level retail plaza to light and air, as well as integrating the project with Seventh Street, a pedestrian friendly and historic thoroughfare connecting financial, retail and historic downtown districts. This multi-level outdoor space will become an open-air marketplace, filled with a wide selection of culinary delights and shopping that reflect the real LA., the one so elusive in the sprawl of the real city. Imagine a single destination in downtown that combines upscale shopping, outdoor cafes and restaurants, art installations and performances, and a hotel for travelers on holiday or business. The Bloc promises to be a SoCal version of Le Bon Marche in Paris or Ferry Building in San Francisco, with the same world class mix of culinary, visual and product delights to be enjoyed by the entire region and millions of annual visitors. The project will be LEED Gold certified and the first such project in Southern California to receive Delos Well BuildingTM Certification.

THE BLOC will also become a transit hub, with direct regional connector subway, streetcar and bus connections bringing customers right into the center of the project. Just a short walk from the convention center and Staples Center, THE BLOC will be a sports and convention hospitality and tourism destination. All of the projects main functions, the hotel and office lobbies, the retail and restaurant operations, and the main valet drop off will orient to strengthen and activate this new plaza, which will accommodate spectators for a continually evolving series of concerts, displays, live performances, and cultural events. Further, the developer will open the existing fortress-like brick walls around the block with new show windows, outdoor dining patios, tenant signage, and new vehicular and pedestrian entrances, along with new landscaping and street amenities.

THE BLOC will transform a 40 year old famous but dowdy urban landmark into an open, lively, urbane, human-scaled gathering place where new experiences are shared and connections born.

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Jul 28, 2015

This is great. I'm somewhat of a newbie but definitely hope to share some in the future!

Jul 28, 2015

My first deal at age 21 i bought a piece of land for 10k and flipped it for 32k in a few months. I thought that was clever

Jul 28, 2015
scott hartnell:

My first deal at age 21 i bought a piece of land for 10k and flipped it for 32k in a few months. I thought that was clever

Details, man, details

Jul 28, 2015
CRE:

scott hartnell: My first deal at age 21 i bought a piece of land for 10k and flipped it for 32k in a few months. I thought that was clever

Details, man, details

My bad, it was a corner lot on a struggling commercial corridor about 3 blocks from the end of gentrification's influence. At the time, i was cold calling absentee landowners and making lowball offers -this person bit - i closed as soon as i could get title. Then i marketed the property widely, got a small time developer who only builds in this particular neighborhood to buy it.. he still hasnt built anything on it. Definitely gave me the deal bug.. at the time a quick 20k profit felt pretty incredible as thats half a year of work for a typical perosn that age

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Jul 28, 2015

Any and all creative financing stories are welcome too... Although, you guys may not have as many since obviously your clients and contacts were most likely seeking traditional/institutional capital

Jul 28, 2015

Uhhhh... Why did someone throw monkey crap at me? What's wrong with my suggestion?!

Anyway... I remembered a couple of stories:

  1. Creative financing deal: a developer in the Los Angeles area wanted to purchase a property with a certain price in mind to take to lenders. The seller wouldn't come down on his price at all, and just seemed too expensive. However, after crunching the numbers, the developer realized that if he gave the seller the price he wanted, but did seller financing and negotiated a very LOW interest rate ( that's the key here), the total cost would actually be lower than if he had purhased the property at a lower price and put a traditional loan on the property with a higher interest rate. Pretty clever.
  2. Another one that I heard about was the acquisition and repositioning of a struggling mall during the recession. At the time, most malls took a huge hit, but the Hispanic population in this particular area was growing rapidly
    ( the mall is located in Texas). So, basically, the landlord shifted his target market and turned it into this huge Hispanic mall and supermarket. He subdivided the space into smaller units, so that space was more affordable for the tenants leasing out space, but because the target market was so big and their were so many merchants, the significantly increased occupancy, and they ended up making more money than they would have leasing bigger units of space out to other types of tenants. The mall thrived. I thought this was a particularly clever strategy because it's a prime example that sometimes you don't even have to change the property itself if you just change your market audience.
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Jul 28, 2015

Double post

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Jul 29, 2015

" but did seller financing and negotiated a very LOW interest rate ( that's the key here), the total cost would actually be lower than if he had purhased the property at a lower price and put a traditional loan on the property with a higher interest rate."

When was this? Info on the rates/structure of the loan? I almost always see seller financed rates higher than traditional rates (at the same LTV, DSCR numbers).

Jul 28, 2015
cre123:

" but did seller financing and negotiated a very LOW interest rate ( that's the key here), the total cost would actually be lower than if he had purhased the property at a lower price and put a traditional loan on the property with a higher interest rate."

When was this? Info on the rates/structure of the loan? I almost always see seller financed rates higher than traditional rates (at the same LTV, DSCR numbers).

Do you see that on land? Because banks typically require higher interest rates for anything they perceive to be more speculative in nature. Not to mention, the lender could have actually been a hard money lender or private lender.

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Jul 29, 2015

one of my favorites is costar buying the mortage bankers association building for like $40mm. The mortgage bankers were underwater and sold the building in 2010 at about 50% what they paid for it in 2008. Costar then proceeded to turn around and flip out of the building in a year for $101mm to a german pension advisor on a 15-year nnn sale-lease back. i believe costar won deal of the year back to back years in the local business journal.

Jul 29, 2015

Mortgage Bankers Association bought it for $79mm ($2 million down), sold 3 years later for $41mm, sold again for $101mm and $40mm profit. That being said the stars really aligned poorly for MBA, 07/08 crash happened and they lost like half their members (and with losing members comes losing fees from membership etc) putting them severely under water quickly both from a property and company perspective.

Costar is indeed in a long term lease there on that sale/leaseback from 2011.

Jul 29, 2015

Nothing worse than being on the wrong side of "the deal of they year"....It's basically a public shaming

Jul 29, 2015

Forbes just put out an article on Donald Trump's net worth that discusses valuations of some of his real estate holdings. Supposedly, a 200 year leasehold he acquired on a Manhattan property in 1995 for $10M is worth $550M today. Pretty fucking sweet deal if you ask me.

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Jul 28, 2015
Zen Alpha:

Forbes just put out an article on Donald Trump's net worth that discusses valuations of some of his real estate holdings. Supposedly, a 200 year leasehold he acquired on a Manhattan property in 1995 for $10M is worth $550M today. Pretty fucking sweet deal if you ask me.

Stuff like this makes me want to kill myself.

Jul 28, 2015
Zen Alpha:

Forbes just put out an article on Donald Trump's net worth that discusses valuations of some of his real estate holdings. Supposedly, a 200 year leasehold he acquired on a Manhattan property in 1995 for $10M is worth $550M today. Pretty fucking sweet deal if you ask me.

Link to article, please?

Jul 29, 2015

My mistake, it was Bloomberg, not Forbes. The breakdown is near the bottom of the article I believe.

http://www.bloomberg.com/politics/articles/2015-07...

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Jul 29, 2015

Macklowe - The glass Apple store at the GM Building - BOOM, embarrassed Trump and now there is going to be a movie made about it. Shocked that no one mentioned that.

Jul 29, 2015

The same building for which sold distressed because of excessive portfolio debt? Embarrassed trump???

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Jul 29, 2015

On that same topic, the Hancock Tower in Boston was a very interesting and profitable venture for Boston Properties.

Aug 3, 2015

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Jul 30, 2015

This one definitely takes the cake: http://www.ocregister.com/articles/bren-364770-kbs...
Donald (Irvine Co.) and Peter (KBS Realty) Bren pulled a fast one on some office product they picked up from Equity Office/Blackstone. Classic case of brotherly love. Here's a brief overview below:

February 2007: Blackstone Group buys Equity Office Properties, owner of 590 properties - including Northern Trust Tower - for $23 billion.

April 2007: Orange County real estate giant Irvine Co. buys 17 buildings from Blackstone Group - including Northern Trust Tower.

December 2008: KBS Trust II of Newport Beach buys Northern Trust Tower "A" Note from Bank of America - essentially, the $95 million first mortgage - for $58 million.

June 2012: KBS Trust II buys Northern Trust Tower "B" Note - essentially, a $10 million second mortgage -from U.S. Bank for $2 million.

June 2012: KBS Trust II sells "A" and "B" notes to entity linked to Irvine Co. for $85 million.

The delight:

* Peter's investment fund says it ended up with an "economic gain" for KBS of $25 million above its investment costs (or, a $15 million profit when seen for accounting purposes) for its three-plus years of ownership of the tower's mortgage.

* And Donald? His empire ends up acquiring $105 million in debts on one of his buildings for $85 million.

Win-win!

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Jul 29, 2015
makecents:

This one definitely takes the cake: http://www.ocregister.com/articles/bren-364770-kbs...

Donald (Irvine Co.) and Peter (KBS Realty) Bren pulled a fast one on some office product they picked up from Equity Office/Blackstone. Here's a brief overview below:

February 2007: Blackstone Group buys Equity Office Properties, owner of 590 properties - including Northern Trust Tower - for $23 billion.
April 2007: Orange County real estate giant Irvine Co. buys 17 buildings from Blackstone Group - including Northern Trust Tower.
December 2008: KBS Trust II of Newport Beach buys Northern Trust Tower "A" Note from Bank of America - essentially, the $95 million first mortgage - for $58 million.
June 2012: KBS Trust II buys Northern Trust Tower "B" Note - essentially, a $10 million second mortgage -from U.S. Bank for $2 million.
June 2012: KBS Trust II sells "A" and "B" notes to entity linked to Irvine Co. for $85 million.
The delight:
* Peter's investment fund says it ended up with an "economic gain" for KBS of $25 million above its investment costs (or, a $15 million profit when seen for accounting purposes) for its three-plus years of ownership of the tower's mortgage.
* And Donald? His empire ends up acquiring $105 million in debts on one of his buildings for $85 million.
Win-win!

Wow, ridiculous story. That reporter did a surprisingly good job breaking it down, too (just looked him up, apperas he's a Wharton grad, not just some random schlub at the OC register like I thought).

Jul 29, 2015

Awesome stuff but problem with this article:

----KBS acquired the $105MM in A&B notes in 2012 IF you take the face values of the A loan from 2008 and the B loan from 2012 and combine them together. The actual face value of the combined notes were less than $105MM- by how much I don't know. In 2012 the "face value" of the Class A note has obviously decreased from ins 2008 par value given the 4 years of IO payments.

Jul 30, 2015

A group of small-time developers in my area noticed that one of the area public school districts was stretched severely thin on classroom space--a lot of schools in the area using portable classrooms, larger class sizes to try and manage the number of students without spending a lot of money on new construction. These guys bought what most investors consider functionally obsolete office buildings at incredibly low valuations reflecting high vacancy and weak demand in these areas for office tenants. Think 1970s-construction suburban office product with poor public transportation accessibility that a lot of investors would think had higher land value with no improvements. The group got a construction lender to fund improvements to build out very basic classroom infrastructure. They then leased the buildings and sold them stabilized for a ridiculous profit. Thought it was a really creative way to think about adaptive reuse.

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Jul 28, 2015

Wow, that's pretty brilliant. I might look into that in my neck of the woods.

Jul 28, 2015

Ha, so this thread got bumped and I saw this old comment of mine. I actually took this idea to my company, which owns a ton of class C office space with high vacancy rate in an urban area that is dying for school space with little-to-no-land to build on. The owners loved the idea. LOVED it. We contacted the county government and offered to build them out the space (to pay for all of their TI) and lease it to them. They told us to go fornicate with ourselves! They said office buildings don't work well with with school buses or something like that! Which is super weird because the less urban county next door has a number of schools in old office buildings. But you've got some old school planners who want to build a $100 million new school on 15 acres of land that doesn't exist.

Jul 28, 2015
Ricky Rosay:

A group of small-time developers in my area noticed that one of the area public school districts was stretched severely thin on classroom space--a lot of schools in the area using portable classrooms, larger class sizes to try and manage the number of students without spending a lot of money on new construction. These guys bought what most investors consider functionally obsolete office buildings at incredibly low valuations reflecting high vacancy and weak demand in these areas for office tenants. Think 1970s-construction suburban office product with poor public transportation accessibility that a lot of investors would think had higher land value with no improvements. The group got a construction lender to fund improvements to build out very basic classroom infrastructure. They then leased the buildings and sold them stabilized for a ridiculous profit. Thought it was a really creative way to think about adaptive reuse.

So let me get this straight - the public schools were short on space, the guys purchased office buildings cheaply, leased them out to the government to utilize as schools, and then sold the buildings to investors for a profit? Very creative! Who were the end buyers? Institutional investors?

Jul 28, 2015
passiveincome:

Ricky Rosay: A group of small-time developers in my area noticed that one of the area public school districts was stretched severely thin on classroom space--a lot of schools in the area using portable classrooms, larger class sizes to try and manage the number of students without spending a lot of money on new construction. These guys bought what most investors consider functionally obsolete office buildings at incredibly low valuations reflecting high vacancy and weak demand in these areas for office tenants. Think 1970s-construction suburban office product with poor public transportation accessibility that a lot of investors would think had higher land value with no improvements. The group got a construction lender to fund improvements to build out very basic classroom infrastructure. They then leased the buildings and sold them stabilized for a ridiculous profit. Thought it was a really creative way to think about adaptive reuse.

So let me get this straight - the public schools were short on space, the guys purchased office buildings cheaply, leased them out to the government to utilize as schools, and then sold the buildings to investors for a profit? Very creative! Who were the end buyers? Institutional investors?

They must be politically connected

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Best Response
Aug 3, 2015

I worked for a guy who owned a roughly 15K sf property in a partnership (vacant grocery store in now one of the hottest neighborhoods in San Francisco). During the Great Recession, the other partners bailed and my boss and I tried to save the property. It was entitled for roughly 50 condo units, but there was a prolonged capital crunch on a non-cash flowing asset. The lender did some "extend and pretend" with us until someone came along and bought the note for roughly $3M, and then commenced foreclosure on us. We lawyered up and declared chapter 11.

In the 6 month CH 11 fight, I was able to fully tenant the building; however, there were some issues with getting permits and completing TI which would take another 6 months. Judge ruled in favor of the plaintiff and took over the property. In the end, the tenants I signed became wildly successful when they took occupancy 6 months later. The market improved. San Francisco per unit land prices went from $60K/door to over $150K/door in the span of 4 years (2010-2014). We pretty much gift wrapped this deal, and this reminds me how fortunes are made and lost. The opportunity costs of a downturn can be life changing. Also, having big money comes with big responsibilities. Easy come, easy go. And asset rich, cash poor can be very bad. There can be a euphoria of becoming rich that clouds your judgement.

One guy told me a very interesting piece of advice. Have one or two of your best located, highest rated assets completely debt-free. When the next credit crisis hits, you have the option of refi'ing you're best asset and getting cash, because there will be a flight to quality and some financing activity.

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Aug 3, 2015
odog808:

One guy told me a very interesting piece of advice. Have one or two of your best located, highest rated assets completely debt-free. When the next credit crisis hits, you have the option of refi'ing you're best asset and getting cash, because there will be a flight to quality and some financing activity.

Interesting.

Jul 28, 2015
odog808:

San Francisco per unit land prices went from $60K/door to over $150K/door in the span of 4 years (2010-2014).

Something's got to give. This isn't limited to just San Francisco. The law of diminishing marginal returns is going to catch up with a lot of people. Maybe not today, and maybe not tomorrow, but a whole bunch of people are being set-up for financial ruin in this real estate market.

odog808:

One guy told me a very interesting piece of advice. Have one or two of your best located, highest rated assets completely debt-free. When the next credit crisis hits, you have the option of refi'ing you're best asset and getting cash, because there will be a flight to quality and some financing activity.

Excellent advice. My group does this; as a result, the owners haven't worried about the market cycle for decades.

Aug 3, 2015

San Francisco is unique, as it has limitations to new supply (in fact, a cap on office development due to Prop M that will be reached this year) and unabating demand due to the new tech renaissance we are having. I guess when technology stops stealing market share from other industries then you will see a decrease in demand, but....

Aug 3, 2015

Two stories involving eminent domain that I heard this past weekend. The first they didn't do anything to earn it they just got lucky as shit. They owned a building with a bunch of crap in it, basically a storage building. However, this crap happened to fit the definition for an "office building" so they got the market price for an office building, instead of a storage shed, when the government bought it to make room for a new lane on the highway. 150k. Turns out the only portion that would be affected was a porch attached to the building. So, they bought the building back for 20k, and they cut off the porch. So, they are still using that building, and they reinvested the money (to avoid taxes) in a house where the son stays so that he isn't wasting money on rent.

The second involves Lindsey Graham, according to the person who told me about the first story. He bought some acres before the process began, got paid the eminent domain price for the land. and then rebought the land with the same kind of discount. Shady to say the least considering his position.

Moral of the story is that eminent domain can be a pretty sweet deal sometimes.

Aug 31, 2015

Deals like this are more common than people think. The vast majority of the time its just sheer dumb luck. I.e. you buy land at $100/acre, a new highway branch is announced that runs right by your property it's now worth $40K/acre.

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Aug 3, 2015

Pretty cool stories, I love this stuff.

Aug 3, 2015

http://www.marketwatch.com/story/american-realty-c...
This

Golden Gate buys Red Lobster from Darden at an undervalued price ($2.1bn), levered up for the purchase. Then sold 500 units to American Realty Capital for $1.5bn thus getting ride of most of the leverage and now owns the asset that is Red Lobster.

Win for Golden Gate

Aug 3, 2015

Those that are in real-estate. I'm sure there are a decent amount of examples like this. Did Darden just miss an opportunity to sell to America Realty Capital because they didn't have the connections, or didn't think it through, etc. Or would the Golden Gate buy have generated the interest in Red Lobster that allowed GG to court people such as ARC and make the sell they made?

Aug 4, 2015

Hudson Bay's acquisition of Saks for a $2.9B enterprise value, and then the subsequent appraisal of Saks' Manhattan property one year later for $3.7B. Not to mention there's still a bunch of value in the rest of the Saks real-estate portfolio.

Aug 23, 2015
LeveragedTiger:

Hudson Bay's acquisition of Saks for a $2.9B enterprise value, and then the subsequent appraisal of Saks' Manhattan property one year later for $3.7B. Not to mention there's still a bunch of value in the rest of the Saks real-estate portfolio.

And now they are taking out a $846M loan on some Saks + Lord & Taylor's which is going to be securitized in a single borrower deal soon.

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Jul 29, 2015

There are plenty of stories, but I recall one that was pretty much luck. I can't remember the bank, but it was in Southeast and they had a ton of branches. It was basically a community bank that was going under. This was during the peak of the 09 recession. The bank announced it was closing and shutting down all branches so the in place lease was useless. A guy ended up buying like 4 branches for like $1.5 million. He was actually planning on growing his existing business which was a chain of tire shops. I think he planned on knocking them down and since the locations were good he would build on them. Anyways he was waiting for the bank to exit and turns out it go bought out by a too big to fail bank that continued its lease. So this guy now had $1.5 million of bank branches and the lease value went through the roof once the government announced TARP. Cap rate fell substantially and he ended up selling for like $7 million three years later.This guy benefited because he was already successful and had good banking relationships that lent t o him during the worst part of the recession. I went to school with his nephew so I found out.

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Jul 28, 2015

Oh, here's a time when the principal of my organization got screwed by McDonald's. He ground leased a property to McDonald's for, like, 25 years with a purchase option at the end. The annual escalator was something like 3%. Well, land values in this area rose at a rate of about 4%, so McDonald's exercised its option at the end of the ground lease and bought the land for about 25-30% below market. Our principal was FURIOUS!

Jul 29, 2015

McDonald didn't screw the principal, they signed a market rate lease.... the market screwed your principal. On a long term lease someone gets screwed every time. That's why you better negotiate your ass off before commencement.

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Jul 28, 2015

Bump

Sep 2, 2015

low-OH hotels (think hampton inn, holiday inn etc) - cash cows

Jul 28, 2015
Link_REDev:

low-OH hotels (think hampton inn, holiday inn etc) - cash cows

High risk high reward?

Jul 29, 2015

Can you delete posts? I typed in "OH?" and realized you meant over head. So now I'm typing this because I can't delete the post---only edit it. @WallStreetOasis.com

Jul 29, 2015

Anyone ever see high school prep boarding school campuses trade? I've seen some nice NNN yields on those with upside building development opportunities on campuses (additional teacher offices/classrooms/dorms). Need AA credit tenant and need to come to grips with a modest residual cap rate due to the lack of a "back up plan" in case 30 years from now the school defaults or leaves. I see these for internationals schools in US and western Europe. Cool stuff.

Mar 22, 2018

Any Real Estate deal with a New Markets Tax Credits component in the capital stack is interesting and pretty complex.

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Mar 22, 2018

Either Vulcan (Paul Allen's Co.) acquisition of raw land in Seattle/South Lake Union 10+ years ago and the foresight to see that area develop in terms of office / multi-family needs (11M sf). Or...Talon's acquisition of the Walton Street west coast portfolio (debt default )for $0.20-0.30/$1.00 during the 2008 crisis - they've sold some of the properties but most have rent rolls that have increased 200-300% over the past 10yrs.

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Jul 30, 2015

Hudson Bay Company bought Saks Fifth Avenue for $2.9bn and monetized some real estate. Most notably their flagship NYC store.

If I understand this correctly, their prop-co signed a ground-lease with their op-co for their flagship NYC store. They refinanced the property shortly after for $1.25bn (it appraised for $3.7bn).

https://www.businesswire.com/news/home/20141124005...

Jul 30, 2015

Bump bump bump. Love reading these. Let's keep this thread alive.

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Mar 22, 2018

I always thought Trump Tower had a cool backstory. Equitable initially refused to sell the land to Trump, so he bought their ground lease instead and Equitable donated the land in return for a 50% stake in the construction project itself. Then there was the task of assembling various air rights, a rezoning battle with the city, etc....

Mar 23, 2018

Aby Rosen of RFR Realty had a doozy about a decade ago wit 2 Herald Square, which has been in the news a bunch because the asset is currently a giant show. Details below:

*Helmsley died in 1997, but his company owned the property until 2000, when Aby Rosen's RFR Realty scooped it up for $92 million. Rosen planned $20 million in renovations and signed Swedish apparel company H&M to 66,000 square feet, including part of the ground-floor space with prime Herald Square frontage. Victoria's Secret soon leased part of the retail space, and French advertising giant Publicis and Mercy College became the primary office tenants. Mortgage documents filed with the U.S. Securities and Exchange Commission in 2003 show that the building's appraised value was $200 million. In 2007, with those long-term tenants in place and the retail market booming, RFR sold the building in two massive, separate deals: one for the leasehold and one for the land. Sitt Asset Management -- led by brothers David, Eddie, Ralph and Jack Sitt and their mother -- bought the 70-year leasehold for a whopping $500 million. SEC records show that the company invested $275 million in cash equity. The Sitts were under the gun to make a purchase at the time because they were executing a 1031 tax exchange -- which allows sellers to defer capital gains if they buy another property. (The year before, they had sold 6 Times Square for $300 million.)
At the same time, SL Green and Gramercy Capital Corp., a REIT now known as Gramercy Property Trust, paid $225 million for the land."

So he bought for $92M, put in $20M, re-leased it, sold the leasehold for $500M, the land for $225M. That's how it's done.

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Mar 23, 2018

This might seem out out of left field as it has to do with single family rentals or it may not be " ingenious" to some, but I am very interested in this space. In the last few years, SFR rental growth has outpaced multifamily rental growth, it is only 35 percent of the country's 44 million rental units, but with more institutional money coming in, the number of SFR rentals are expected to increase. SFR constituted only 30% of the overall rentals not too long ago and it was predominantly controlled by mom and pop operators.

This article goes into detail into Blackstone's 50,000 SFR acquisitions between 2012-2016. TLDR- Bought 50K homes for 8.3 billion (166K for each home), invest 1.2 billion in cap ex (25K for each home), borrowed 80% in debt, conducted an IPO and sold 25% of their equity for 1.54 billion, Blackstone has earned a profit of more than 2 billion by entering into the SFR rental space.

https://behindthedeals.com/2017/03/15/the-story-an...

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Jul 28, 2015

We had a debate about this on WSO maybe 5 or 6 years ago, and MAN did I whiff on this one. I was certain that this was a completely ridiculous play.