Challenge

A select Matthews™ client was looking to sell their 28 unit, 20,906 square foot apartment property in the Palms Neighborhood of West Los Angeles, CA. The client was a private capital multifamily owner who was motivated to sell the property due to the building having a considerable amount of deferred maintenance, was difficult to manage, and did not generate enough income due to rent control laws. This ultimately resulted in the property being placed in the LA Rent Escrow Account Program (REAP), which encourages multifamily owners to maintain the property in a safe and habitable condition.

Strategy

By utilizing the Matthews™ 1031 Exchange Program, the Matthews™ broker was able to show the seller that they could exchange into an investment that had zero management responsibilities and would increase their overall cash-on-cash return. The client was presented with two off-market 7-Eleven’s in Florida, which were listed by another Matthews™ broker. The team collaborated to determine if the two 7-Eleven’s would fit the client’s needs. These properties were brand new developments with excellent surrounding demographics, on a long-term corporate lease with an investment grade tenant. By utilizing Matthews™ proprietary technology, the Matthews™ representatives were able to present the seller with multiple buyers. The buyer who was ultimately selected admired Regent Streets’ proximity to Downtown Culver City and the building’s rental upside potential. The buyer provided the seller with two 30-day extensions for the seller to get their affairs in order to purchase the 7-Eleven’s.

Results

With the collaboration of dedicated agents and the platform, Matthews™ successfully executed the 1031 Exchange from a multifamily investment to two single-tenant net-lease investments. The transaction was perfectly timed; within a week of closing Regent Street for $7.1 million, the seller purchased the two other properties for a combined purchase price of $7.7 million. This resulted in limited income loss and a smooth transaction. Both the seller and buyer were pleased with the outcome of the transaction.