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Category: Apartments, Case Study, Net Lease Retail Tags: 1031 Exchange, Apartment, Los Angeles, Net Lease Retail
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Property Profile

$7,100,000
Leasable Area
20,906 sq. ft.
Year Built
1972

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 mom-and-pop 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 for sale by another Matthews™ broker. The team collaborated to determine if the two off-market 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. The buyer, an institutional client, admired Regent Streets’ proximity to Downtown Culver City, and the rental upside potential the building offered. The team encountered a long escrow process and negotiated two 30-day seller extensions; however, they were able to retain the buyer and seller’s focus on the bigger picture.

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.

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