$1.7 Million In Value Created In 12 Months On This One Commercial Deal.
We've been in the process of refinancing this property for a month…We’ve been on pins and needles waiting for the appraisal to come in
We just got word yesterday. But before that let me give you some background…We closed on this property in November 2021 after trying to negotiate with the owner for almost two years!It was ineligible for bank financing because 95% of the tenants (mostly office tenants) we’re month to month. But most of them were long term tenants, like ones that had been there for decades. We were confident we could get most of them on leases.
The seller made us do something really weird during the purchase and sale negotiation. They made us sign an addendum to the contract stating that we would give all month to month tenants a bare minimum 4 months to stay at the property. We were like why? You know we want to keep them all and get them on leases? (They also forbade us from having any contact with any tenants or visiting the building without supervision)
Unbeknownst to us, something shady was going on…
So we got the property under contract. We had to raise $1.5 million in two weeks to acquire it.I melted the phone lines calling all of our investment partners who had funded our deals in the past…
Nearly all of them said “this is too risky” or said that we were over paying for the property by 2x. Fear and doubt set in. Maybe we were over our skis on this one…
(Not to mention, owning this historic skyscraper was a childhood dream of mine? I started to think “am I attracted to this deal because of some stupid childhood fantasy?”)On my last call, I got one of our investors who was interested in lending the whole $1.5M but he wanted 19% equity in the building.
We made a deal! Fast forward to closing day. We were euphoric
The day after closing we went to the property to get keys…What we saw horrified us
The hallways were packed with boxes. Most of the tenants were getting packed up and moving out!I asked them, where are you going? All of them said “oh the prior owner said you were booting all the tenants out and turning the building into condos. We are moving across the street!” (to a building the prior owners still owned!!!)W T FI was shocked and incensed. How could people in such a small town be so treacherous? I spent the next few days feeling angry and sorry for myself. Well I had no choice. I wiped away my bitter tears.
I decided to put my anger to productive use.
I‘M going to get this thing leased up and stabilized if it f-ing kills me. I spent the next several months working my *** off to make that happen.
The first few months were scary as hell. The property was burning through cash like no one’s business. We had to play the cash flow game.
Our team worked like hell for an entire year towards the goal of getting this thing bankable so we could refinance it and take our private money lender out.
And one year later we got a bank interested in refinancing it.
Just yesterday, our banker called me about the appraisal. I was scared…The appraisal came back at $3.2 million. I couldn’t believe it…We created $1.7 million dollars in value in 12 months!!!We aren’t over the finish line yet but it’s great news nonetheless.
The bottom line is this… Go Big!
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Great story and big congrats. Shows you what devious rear ends LL's can be!
Awesome perseverance and thanks for sharing.
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The picture is great. Don’t know the Rochester market but $1.5mm for an 11 story building sounds like Pennies. Being that close to downtown I could see one stripped floor being worth $1mm for residential.
Good luck on the value add. Or just as is.
@Henry Clark our economics in downtown rochester are very challenging thus you can buy great buildings at a fraction of replacement cost. I am bullish about Rochester long term but I still think we will have some headwinds over the next 5-10 years
@Bjorn Ahlblad I couldn’t believe it. I even know one of the sellers pretty well that were one of the heirs which is why I was kind of naive to the treachery going on
@John McKee thank you! 1% inspiration 99% perspiration is key lol
Congratulations! What a fantastic story. I couldn't imagine the sweat and pains you had to go through to pull it off. I'm sure there are thousands of lessons learned from doing this deal that's worth more than the $1.7M you created in equity.
I love this story. It demonstrates the stress and pain that sometimes comes with hard work, following your intuition, and taking risks.
What a shady move on the sellers part. I guess the lesson learned here is don't trust anybody during due diligence. Thankfully your were able to carry the note during the period of vacancy but this deal had the potential to bankrupt you.
Nice job. Thanks for sharing.
Are you intending to condo the building?
Is there enough elevator shaft space to handle all of the condo owners floors going to work at 7:30 to 8:00 am, or will there be long waits?
Pretty building, too bad about all of the move outs though.
New modern glass looks different than old wavy glass if you condo.
Do you have enough parking for condos?
Can you make a roof grotto/bar area and lease it to a bar owner for use during the warmer months, and for weddings.
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My heartrate increased just reading that post.
Value or not, that is more risk than I could stomach!
Glad it worked out, but would you have done it again ?
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Inspiring story of adapting and overcoming. Well done!
I flinch though at investor partners. How's that working out?
I assume you hold this in an LLC? How many members?
A good deal and a bad partner = a bad deal. Hopefully you're good👍
Way to go! Keep us posted on repairs, new tenants, etc.
What a great building and location in Rochester. Spent many hours visiting attorneys and doing closings in this building through the years. Thank you for sharing your story. It shows how important due diligence is, especially when doing larger deals. Glad you were able to pull it off and create so much equity after your hard work. Sorry to hear that there are people who would do something so underhanded in a town like this where everybody in the real estate business knows each other. What goes around, comes around. Keep up the hard work and persistence--and go big!
@Ke Nan Wang thank you! The lessons were worth far more because I know what to next time with more confidence!
@Scott E. That’s why advocate for always use other people’s money so you can keep a balance sheet of cash to weather storms. We were also blessed to have a portfolio of other properties to keep this afloat while we stabilized it
@Scott Mac condo ing is not really a thing in rochester due to the limited economic capacity. Besides I don’t really like selling properties that I like. Once you sell something is the last time it made money for you!
@Ronald Rohde yes I would have. If I knew that all those tenants were going to move out, I probably wouldn’t have done the deal. So things needed to happen just the way they did to have the false confidence to do the deal.
@Steve Vaughan yes our company owns 81% and our investment partner owns 19%.
At this point we have passive partners who put up the cash for deals and just get mailbox money in return. When the expectations are very clear, simple and deliverable, partnerships can work really well.
@Randy Haller thanks Randy! I hope to see you real soon!
Awesome @Matthew Drouin! That’s a great building! I think I looked at the post not realizing I got to it from an alert and thought, that looks like Rochester.
How many units in that building?
It inspires me to go big. I’ve been thinking about it for far too long.
@Larry Turowski 43 commercial units. It's a mixed use office building. Retail on first floor. If you're looking to go big, check out our Facebook group called Go Big! Real Estate Investors Group
I just started it and am launching a live podcast where the first 30 minutes will be interviewing an investor on the first time they went big and a live Q and A on the second half.
You still fixing and flipping?
Quote from @Matthew Drouin:Yes I am. I'll DM you.
@Larry Turowski 43 commercial units. It's a mixed use office building. Retail on first floor. If you're looking to go big, check out our Facebook group called Go Big! Real Estate Investors Group
I just started it and am launching a live podcast where the first 30 minutes will be interviewing an investor on the first time they went big and a live Q and A on the second half.
You still fixing and flipping?
Good Story, how can you get all the leased done and add the value?
Fantastic example of grit, determination, and courage... Way to go!!!
Former Rochesterian here, and immediately recognized the Wilder building! Really great story that must have been scary as hell while going through it. Do you recognize a tax break by being in an Opportunity Zone? Will join the Fbook group.