THE PROPERTY
Kirkwood Place is a modern mixed-use property consisting of upscale apartments and Class A commercial space. Completed in 2017, the property provides residents with a sophisticated experience and a generous selection of amenities, including a lounge, coffee bar, and 24-hour fitness center. A short eight-minute drive from Downtown Greensboro, Kirkwood Place is located within a 5-minute walk of restaurants, shopping, entertainment, and the Atlantic & Yadkin Greenway. Between the 57 residential units and the ground floor commercial space, Kirkwood Place offers a total of 67,665 rentable square feet.
THE CHALLENGE
The developers of Kirkwood Place had completed a beautiful property and were ready to exit the project. The most significant problems facing a sale were the lack of comparable properties and COVID-19’s impact on the retail market.
Additionally, even though the residential occupancy rate was 98%, the 45% commercial vacancy rate created a major obstacle to obtaining the seller’s initial pricing guidance.
The commercial vacancy rate was further complicated because the management, leasing, and sale of Kirkwood Place were handled by three different companies – none of which were the developer. This fragmentation of responsibility created communication challenges and scheduling conflicts.
The one-bedroom rental units were leased below market value, but not by a significant margin – thus leaving the commercial retail space as the only real value-add opportunity.
There was also a disconnect between the seller’s and buyer’s expectations of value, leading to difficulty beginning the negotiation process.
The first contracted buyer could not perform and was forced to withdraw their offer.
During the due diligence process for the buyers who would complete the transaction, a lease representing 30% of the commercial space fell through, creating a significant challenge in obtaining funding for the loan.
The Sweetwater Investment Sales team faced several issues:
– lack of comparable properties
– high commercial vacancy rate
– difficult retail market due to COVID-19
– communication and scheduling difficulties
– limited organic rent growth for residential units
– disconnect between buyer and seller expectations of value
– first buyer unable to perform
– major commercial tenant fell through before closing
THE GOAL
Obtain the highest and best price for Kirkwood Place.
THE SOLUTION
A three-phase approach was required to obtain the highest and best price for Kirkwood Place. The first phase entailed developing a superior marketing strategy, followed by getting the property in front of the right buyers and finally getting the buyers through the closing process.
The Sweetwater marketing team leveraged various assets to develop promotional materials for the marketing campaign.
Analysts, underwriters, and brokers teamed up to evaluate the property’s financials and market conditions. Further, the analyst and underwriters developed the detailed financials required to bring the property to market.
While the analytics were being developed, the Sweetwater marketing team brought together a group of talented professionals to produce the images, video, 3d tours, web content, and other media to be used during the marketing campaign.
Once all of the products were complete, the first advertising blast was sent out. Thousands of investors received emails introducing the property to individuals and groups focusing on assets like Kirkwood Place. The advertising was not limited to just Sweetwater Capital’s internal buyer list – the property was also marketed on Real Capital Markets, Crexi, LoopNet, and CoStar.
With thousands of impressions, it was not long before there were hundreds of qualified leads. The Sweetwater Investment Sales team followed up on every one of these leads.
Even while COVID-19 was impacting markets across the country, the investment sales team was able to bring the seller multiple offers. After completing the final-and-best process, a winning bid was accepted, and the due diligence process started. Unfortunately, the buyers could not complete the deal and withdrew their offer.
Because the investment sales team never stopped communicating with interested parties, it was not long before there was an accepted offer from a new buyer.
During the contract period, several hurdles threatened to derail the transaction, including a tenant backing out of leasing 30% of the commercial space, jeopardizing the deal’s funding.
Due to their extensive experience in commercial real estate sales and financing, the Sweetwater Capital team was able to help the buyer and seller navigate the challenges and keep the deal moving forward.
Just as COVID-19 restrictions were starting to wane, the transfer of ownership for Kirkwood Place was completed, and both sides of the transaction walked away with a win.
SUMMARY
The Sweetwater Capital marketing, financial, and Investment Sales teams developed a superior strategy to expose Kirkwood Place to the largest number of qualified buyers possible. Their skill and determination set the stage for a successful transaction even while COVID-19 restrictions changed how business was transacted.
When retail markets saw declining values across the nation, the Sweetwater Capital team was able to secure a 4.25% exit capitalization rate for the seller – while the national markets were averaging rates between 5.5% and 5.7%.
Thanks to the efforts of the Sweetwater Capital team, Kirkwood Place sold for $11,250,000 at a 4.25% capitalization rate – a complete 1.25% higher than national rates for a similar property. The result was a sales price 22% higher than the national rates – equating to an additional $2,550,000.
Learn more about Sweetwater Capital
Sign up to receive updates like this directly to your inbox.
