Retail / Offices Santa Monica – 256 26TH St.

Retail / Offices Santa Monica – 256 26TH St.

Retail / Office
APPX 2,700 Sq. Ft. Retail
APPX 2,755 Sq. Ft. Office
256 26th St, Santa Monica, CA 90402

THE FULL STORY

Spotting Value

1204N was acquired with a view of transforming it into a high end rental or my personal residence. This Bank of America REO 1 bed, 853 sf property was impacted by the fallout of the 2007-2009 Great Recession and as such was acquired all cash on an as-is basis. The building itself was struggling financially with many notices of defaults, making it hard to secure financing but this is often where value can be created.

Spotting Value

Initially renting offices in Beverly Hills, we were on the search for a good piece of land or a small building where our offices could be relocated. Our architect knew someone in Santa Monica who had done a project and gotten permits for a family that wasn’t starting construction on the land for some reason. By virtue of its location, it became apparent that this land held immense value.
commercial office retail, 26th st, santa monica, exterior street view
commercial office retail, 26th st, santa monica, open plan office
multi-family apartment in beverly hills ca, outside front view with side entrances, real estate investment
multi-family apartment in beverly hills ca, outside view of side entrance at night, real estate investment

Investment Outlook

There was immense confidence in the value that the location of this land possessed. Our assessment of the market indicated that even if it didn’t generate enough cash flow initially, over time the building would attract tenants at more impressive yields.

Since we didn’t need to be paying rent as a tenant in another location, even if we were in the red by that amount on this building, the benefit of not paying rent anymore and owning a building with a lot of upside made it a worthwhile investment.

1200 wilshire
256 26th street

Condition at Purchase

Since it was purchased on an as-is basis, the property’s characteristics at that time weren’t great but we sensed that there was value there to extract. This was a unique unit situated on the 12th floor with a great 180-degree view. It also had a balcony. The banks were assigning value to this unit compared to others but that wasn’t exactly a fair comparison owing to the dynamics at play here. We saw inherent value.

The property’s condition at purchase was less than ideal. There was mold, outdated Formica countertops, and floorings that had been laid on top of floorings over the years. The unit’s hallway was a waste of space that could have been better utilized as closet space (a desperately needed addition) or a small den. Everything was in need of updating but there was plenty of space to execute that plan.

Condition at Purchase

Before accepting the offer, the family had revealed that the permits they had obtained would expire within a month. So we had to be sure that we could at least get the footings ready for inspection by then otherwise the permits would be lost.

The builder was confident that it could be achieved within the month, therefore, construction began soon after the land was sold and the footings were ready by that time, enabling us to continue with the construction without losing the permits.

commercial office retail, 26th st, santa monica, bathroom
commercial office retail, 26th st, santa monica, waiting area

How We Added Value to the Property

We knew that because of the location, the building that would be constructed here is going to have a lot of upside. The plans were improved upon to add more value to the property with additions such as elevators, etc.

The idea was to get as creative as possible with the plans to extract the best value out of the property. Ultimately, this building provided us with a great office space and a valuable unit downstairs that was rented to a tenant for over 30% of what the broker-suggested market rates.

1200 wilshire
256 26th street

Our Confidence

Despite the dilapidated condition of the property, we were confident that this was an up-and-coming neighborhood that was evolving into even a more vibrant community. The younger demographic would result in a spike in demand for modern homes.

We capitalized on that opportunity to build out the property and it has eventually proven to be a hidden gem – and honestly one we should have kept.

What We Were Confident About

Despite the dilapidated condition of the property, we were confident that this was an up-and-coming neighborhood that was evolving into even a more vibrant community. The younger demographic would result in a spike in demand for modern homes.

We capitalized on that opportunity to build out the property and it has eventually proven to be a hidden gem – and honestly one we should have kept.

1600 west plano parkway

What We Were Confident About

I was confident that this building would have a lot of upside, not only because it would enable us to establish offices in a building that we owned, but because it would attract lucrative tenants. That’s why we decided to make an offer on what was effectively an off-market property and despite that, it still had several offers on it.

We were able to win in the end as we ended up offering exactly what the family asked for and were also able to work with our builders to get the footings in within the month so that the permits were not lost.

commercial office retail, 26th st, santa monica, reception
commercial office retail, 26th st, santa monica, office

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