Single Tenant Retail.Development 56,000 Sq. Ft.Parking lot 90,000 Sq. Ft..4600 Van Nuys Blvd, Los Angeles, CA
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.
It was very easy to spot the value in this property. The land was situated in an incredibly strong location. It was very close to the intersection of two freeways so there was always going to be a lot of traffic and subsequently, a lot of footfall for the business that would eventually be utilizing the property.
The investment outlook was promising. The land itself was bought with cash so there was virtually no risk. We knew that we had a lot of options in terms of the projects that could be built upon the land.
Our assessment of the market indicated that major tenants would be interested in that location and that the property would yield good cash flow as a result of that.
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 There was mold, outdated Formica countertops, and floorings that had been laid on top of floorings over the years.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.
There was no construction on the land when it was acquired. We would build accordingly based on the tenant that we signed on. Ultimately, this property was developed as a single tenant retail location.
Leading nationwide consumer electronics retailer Best Buy was the tenant that leased the property from us. There was potential in the property to go with an even bigger project, such as a Home Depot, but that wouldn’t fit with the needs of the community.
We knew that given the location, there would be a lot of upside on the property and that attracting a major tenant wouldn’t be that big of a problem. Thus plans were drawn up to construct a single tenant retail outlet on the property.
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.
I was confident about the upside potential on this deal. Not only was the land value poised to go up significantly, the attractive location would also fetch top-dollar in rent from long-term tenants who would be interested in setting up shop in a high visibility area.
The inherent value of the location and the value that was added to it through construction ended up yielding a significant return, even during the 2008 downturn, when this property was sold for a significant return.
The property did have a lot going for it that subsequently made me consider it as an investment property. It’s located next to Beverly Hills with a mall being remodeled right next door. However, compared to others in the area, the building’s common areas and temporary financial and legal problems left a lot of potential buyers on the sidelines.
What made this such an incredible value proposition was the evolving demographic. Lots of young people were moving into the area and that brought an influx of new money and solid businesses. That inspired confidence about property values in the area climbing in the future. Also, unlike many of the other units in the building, the position of this unit within the property undoubtably gave it one of the most magnificent views.
Initially, it felt that the property’s marketability wasn’t good but we did our investigations and found lots of what we call “ingredients” that we like to see when a property has potential that is hard to see. We worked with Slater Development (slaterdevelopment1957.com) who subsequently connected me to WDA Architects (WhittenDunn.com). We drew up some pretty great plans to renovate the unit.
We opened up the walls to get every square inch of space in utility. We redesigned the hallway into a mini-den that eventually became my son’s room. More previously wasted space from the hallway was also utilized to increase the size of the bathroom. New grey tiles were added for a modern look. The kitchen got a thick Caesarstone counter with high-end appliances from JennAir, including a wine fridge, a steam oven, and an induction magnetic range. We gutted it completely, added tons of new cabinets, glass doors, and installed an entertainment system with speakers throughout.
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