From CA Low-Cap to AZ High-Yield

Challenge: Uncovering Hidden Environmental Issues

During the escrow process, an unexpected environmental concern arose. While the seller’s 2004 Phase I Environmental Report indicated no issues, the buyer’s newly commissioned Phase I revealed the presence of underground storage tanks (USTs). These tanks had been overlooked in the original report due to a planter box concealing the former fueling station from the property’s days as a Pepsi-Cola distribution warehouse.

Seller’s Objectives

The seller, a retired operator who had previously sold the collision center business but retained ownership of the property, was utilizing the lease income as retirement funds. Having relocated to Arizona, he recognized the impending expiration of the lease and aimed to reposition his short-term asset in California into a long-term investment in Arizona, seeking stronger cash flow and stability.

Buyer’s Strategy

Represented by Matthews™, the buyer, a Southern California-based family office specializing in industrial properties, saw beyond the traditional cap rate valuation. They identified potential in the property’s price-per-square-foot and the opportunity to reposition or redevelop, especially considering the current tenant’s below-market rent.

Navigating the Deal

Upon discovering the USTs, we facilitated open and transparent communication between both parties. The tanks were found to be intact with no leakage. We negotiated additional time for the buyer to manage the removal of the tanks and secure a price reduction equivalent to the removal costs. This collaborative approach ensured the deal remained on track and culminated in a successful closing.

Outcome: A Strategic Exchange

The seller successfully transitioned from a short-term environmentally challenged property in California to a brand-new construction fast-food property in Arizona. This new investment offered strong cash flow and a 20-year lease with renewal options, aligning perfectly with the seller’s retirement goals and preference for a stable, long-term asset closer to home.

Conclusion

This case exemplifies the importance of thorough due diligence, adaptability, and strategic negotiation in real estate transactions. By identifying hidden challenges and collaboratively addressing them, we facilitated a deal that met the distinct objectives of both the seller and the buyer, transforming potential obstacles into opportunities for growth and stability.

Client Testimonial

As a retired operator turned passive owner, I am grateful for the opportunity to work with Marco Arambula and Jake Linsky. I was initially hesitant about pursuing a 1031 exchange because of the tight timeline and potential hurdles. However, Marco and Jake walked me through their process, shared their track record of successful transactions, and quickly put my concerns to rest.

They assisted in the sale of my collision center property in Southern California. Despite an environmental challenge that occurred unexpectedly, Marco and Jake remained proactive. They worked closely with the buyer, an experienced industrial investor who understood the situation and was willing to proceed through transparent communication and effective negotiation. Jake and Marco secured a price adjustment and extended timelines that led to a successful closing.

Following the disposition, they advised and assisted us in completing a 1031 exchange into a brand-new construction absolute NNN fast food property in Phoenix Arizona, featuring a 20-year absolute NNN lease with rare 3% annual increases.

This strategic move aligned perfectly with my goals of transitioning into a long-term, stable asset closer to my current residence in Arizona.

Throughout the transaction, Marco and Jake went above and beyond, from providing real-time market insights to walking me through every detail of both the sale and the purchase. Their responsiveness, integrity, and professionalism were unmatched. They did not just broker a deal, they acted as true advisors and partners in helping me reposition my portfolio for long-term success.

I highly recommend Marco Arambula and Jake Linsky to any property owner or investor seeking knowledgeable, trustworthy, and results-driven commercial real estate professionals. Their expertise in net lease investments, creative problem-solving, and commitment to client outcomes are truly exceptional. I look forward to working with them again in the future.