A client contact via the Internet defined a specific real estate need in the Office and Industrial area. The company enjoyed a wild growth that exceeded its projections and had a need for about 10,000 square feet of office space. The pro forma’ed growth of the company was in single digits and the actual growth was in double digits. Collateral to the office need was the demand to tie the need for warehouse/industrial real estate for the operations of the company to the office space requirement.
The original concept was to seek one building for both needs, but the conventional ratio of office to industrial space is about 20%. Their need was for two thirds. The obvious option was to find a large enough industrial space with adequate parking and build out the office. No viable alternatives were available in the market place, but an office building of quality construction in a prime location became available. The competition for acquisition of this parcel was intense and the client’s growth demands and capital needs required financing. To address the client constraints and compete against other purchasers, we structured a transaction offering the Seller full price, but converting the transaction to a lease to the client with an option to buy, based upon the client doing a substantial remodel at the client’s sole cost and expense. This is what was.
The Sellers’ had developed and operated the property and were reluctant to put in the capital necessary to address issues to make the property rent competitive in a tight market situation. The client saw the beauty in the “bones” of the project and took the opportunity and ran with it. Today, what exists is a building leaping forward physically and functionally to ensure its long term ability to raise rents and improve the tenant experience in today’s office rental market.
What will be, as a result of the vision of the tenant and an intelligent use of materials and improvement of the physical and functional value of the asset, is that the property should shortly be valued at more than twice the purchase price. Vision and effort will always make the property more valuable.
