The Palm Apartments
The property, The Palm Apartments, was acquired from an out of town investor in 1995 for $1,200,000. The property was in decent working order and was purchased at what he believed to be the start of an increasing market. The opportunity was to improve the property and raise rents through intensive management and improvements and to position the property for a long-term hold.
The Palms Apartments was an attractive investment opportunity located in Upland California; an upscale Inland Empire community; however, the property was located in a less desirable address within the city and the property was unique due to its one story park like feel. The property is a 28 unit, 4, two-bedroom one-bath units and 24, one-bedroom one-bath units. It’s a pride of ownership building with excellent landscaping and curb appeal providing an excellent first impression.
The property was not in need of any immediate repair but needed to be updated over time and lacked quality management. The prior owner was a passive owner/manager who hired a firm to manage the property. They did not take advantage of the increasing market rents and/or didn’t position the property to be competitive. When we purchased the property, the rents were $14,280 per month. Through effective marketing, and quality management, we increased rents to $23,400.00 within 4 years and then to $26,080.00 two years later.
We currently still hold this property. Through our management and oversight of the market this building even during the worst economic times only had a 5% vacancy. The low vacancy was a result of our surveying the market, being competitive and going after tenants in the market using creative marketing techniques. Over the term we have updated all of the units to modern standards including granite counter tops, re-plumbed the building, new paint and new roofs over the carports. The investors now virtually have a new building with a great principal pay down to the loan and a phenomenal return of over 25%.
Worth $3M or so now
Fairmont Office Plaza
The property, Fairmont Office Plaza, was acquired from an out of town partnership in 1998 for $3,200,000. The property was a good-looking newer building. It was purchased at what we believed was the comeback time for office space. The opportunity was to shore up the main tenant with a long-term lease and to lease out the vacant space with new 5-year lease terms. Through leasing and intensive management we would be able to sell this property within a 3 year time period.
The Fairmont Office Plaza is in downtown Riverside area located in the Inland Empire; however, the property was located in a less desirable address than the “Downtown Market” and its rents reflected that as well- so it was more desirable from a price point with being a few minutes of what the “Downtown” location has to offer. The property is a 42,000 square-foot Class B office building, elevator served with ample parking. It’s a pride of ownership building with excellent curb appeal providing an excellent first impression.
The property was in good condition. We spruced up the landscaping and painted the outside. The prior owner was an owner/manager who did everything himself. They did not have a good grasp on where rents were and also the impact that the lack of cash flow had done to their bottom line by having the vacancies. When we purchased the property, the rents were above market, but were under lease agreements. We filled the vacancies at market rents with annual increases and also renegotiated a lease with the major tenant with Tenant Improvement dollars to get them to sign a 10-year lease, which would be more attractive to a new buyer. All of these changes increased cash flow and we lowered the cap rate and priced it to sell.
We sold the building for 4.3 million dollars in 2000.