Challenge

4321 Fulcrum Way is a 168,000 square foot build-to-suit building for an Internet Children’s Clothing Store Distributor. When the business went out of business and the building went dark, the out of state owner was faced with the situation of how to create cash flow from a special use building to service the existing debt. To further complicate matters, the loan to value ratio left very little equity available to draw against for re-tenanting.

Solutions

Our team initiated an aggressive leasing program that brought the building from 100% vacant to 65% occupied within the first nine (9) months of the assignment. This was accomplished by securing two (2) tenants and coordinating economic incentives from both the State of New Mexico and City of Rio Rancho. Due to the tight time frames of the transactions, our team oversaw the construction management process to insure that all parties to the transaction were taken care of and that deadlines were met including re-negating a contract with the regional electrical service provider to bring in additional service to the building. Although this re-tenanting effort resulted in adequate cash to service the debt, there were no reserves left to lease the balance of the building

Although our team continued to market the building for long-term tenants, we also focused our efforts to identify potential users to purchase the building. During this process we were able to secure a commitment to lease the balance of the building from a credit tenant. This information was assembled into a package with the building operating information required for a third party developer to make an informed decision regarding the purchase and pending lease. It was a challenge for our Team to identify developers/buyers who would understand the dynamics of purchasing the property and then undertaking the “build-out” for the new lease to realize the upside of this project in a very tight time period. After a very selective and extensive marketing effort, we identified several experienced Developers who were qualified and desired to take on the purchase. Through a bid process with a short list of developers, our Team negotiated a final sale.

Results

The sale resulted in the investor receiving 100% of his investment returned from a potentially disastrous situation in less than eighteen (18) months from the project assignment.