ethan plaza

Value-add Case Study (sold)

Ethan Plaza

The Opportunity

• $2.375M acquisition of a newly constructed, 51,425 SF, distressed multi-tenant REO retail property from Wells Fargo Bank

• $46 per square foot purchase price represents a 49% discount to replacement cost and a 73% discount to the $9.5M construction loan made to the original developer in 2008

• Potential to add significant value through lease up of remaining 80% vacancy and construction of additional square footage

Value-Add Strategy

• Immediate implementation of a local/regional rebranding campaign to reintroduce the asset to the marketplace

• Roll-out of an aggressive hands-on leasing strategy offering newly constructed retail product at lease rates 20%+ below current market with turn key tenant improvement packages and leasing commission bonuses to the brokerage community

• Audit and overhaul property level operations to maximize efficiencies and reduce costs

Execution / Results

• Achieved project stabilization 17 months ahead of schedule – 88% stabilized occupancy by month 8 vs pro forma 90% occupancy by month 25

• Outperformed pro forma lease rates by an average of 26% – achieved weighted average lease rate of $13.10 /SF versus pro forma of $10.41 /SF

• Sold after a 14 month hold for a $4.2 million profit compared to a pro forma 42 month hold and $3 million profit

• Achieved a project level 134% IRR and 3.45x equity multiple compared to a pro forma 31.44% IRR and 2.29x equity multiple

 
Property Description

 

Property Type:
Multi-tenant Retail

Sub-Market:
Gilbert, Arizona

Number of Bldgs:
Five (5)

SF / Acres:
51,425 SF / 9.1 acres

Year Built: 2008

Initial Occupancy: 20.4%

Occupancy at Disposition: 88%