Single Tenant RetailAPPX 7,679 Sq. Ft.1200 Wilshire Blvd, Santa Monica, 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.
The incredible value that this property held was evident at first sight. Buying this property was a no-brainer due to its extremely attractive location. It was clear that if a better building was built on this property, it would attract lucrative tenants.
The location contributed significantly to the investment outlook of this property. It’s a very strong corner on Wilshire BLVD. This wasn’t a signalized corner, allowing for ingress and egress without a signalized stop.
We had an understanding of the leases, knew what the construction costs would be and the price per sq ft being asked was relatively cheap. Since we already had a builder, it wouldn’t take much time to break ground on the project.
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 There was mold, outdated Formica countertops, and floorings that had been laid on top of floorings over the years.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.
At purchase, there was a Best Tires location on the property. It very much looked like a dead lot and the property certainly wasn’t in any condition to attract tenants that wouldn’t mind paying market or above market rates for a long term lease
The property also came with a back lot. Initially, the plan was to build apartments on the back lot in addition to the new building in the front that would have been for a long term tenant.
I was confident that this property’s inherent value was right in front of me. It just needed a good building that could attract tenants. A nicer building was built with the primary goal of gaining the attention of better tenants. Work started swiftly as we didn’t need to chase down a builder.
This project worked out very well for us as once the building was complete, Fidelity agreed to sign a long term lease. We’ve actually had Fidelity as the tenant on this property since day one.
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 knew the construction costs and knew that once the building was completed, it would attract a high quality tenant, simply because this was a good location for long term positioning. The property’s value was always a no brainer.
Even though the plan was to build apartments on the back lot, we ended up selling that, with the funds generated being used to further improve the building being constructed on the main lot.
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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