Case Study – Nuovo Magnolia 6 Units
Key Deal Points
- 3241 21st Ave W, Seattle
- 6-Unit, Turn-key Asset
- No Negotiation after Mutual Acceptance
- Mutual to Closing Table in 23 days
- 1031 Exchange Buyer
- Sale Price $1.725M Cap Rate 5.23%
Our team really enjoyed working with the Lee & Associates Northwest Multifamily team. During the marketing, they got creative and encouraged us to stage one of our units to increase prospective tenant traffic, help us achieve both a higher rent, and give the building a nice unit to tour for prospective buyers. They gave us weekly updates on their progress even as the market slowed a bit and continued to field inquiries even as we started to look into refinancing options. Sure enough a strong 1031 exchange buyer surfaced and they encouraged us to engage with them. Turned out they made an all cash offer and we were very pleased to sell the property and return proceeds to our investors. We would not hesitate to highly recommend the Lee team.
- Anthony Galluzzo,
Southgate Real Estate Ventures
For more information regarding this case study, please contact:
Candice Chevaillier, CCIM
Principal
D (206) 773-2694
cchevaillier@lee-associates.com
Daniel Lim
Vice President
D (206) 773-2692
dlim@lee-associates.com
Dea Sumantri
Associate Vice President
D (206) 773-2680
dsumantri@lee-associates.com
Chris Larsen
Associate
D (206) 773-2695
clarsen@lee-associates.com
Challenge
The seller is a successful value-add syndicator, and after having fully remodeled and stabilized this asset, was looking to realize the investment group’s returns on this project. Familiar with the Lee & Associates Multifamily team’s marketing skills and strong presence in the Magnolia & Queen Anne, our client reached out to us to represent his group in the marketplace. Initial marketing timing was targeting a longer close to allow for a loan maturity which stepped down the prepayment penalty. As the building hit the market, multiple rate hikes by the Fed created significant market uncertainty and that put the Lee & Associates Multifamily team to the test in navigating the marketing process in an ever-changing market.
Action
When the asset hit the market, the lending environment changing, with rates initially hovering in the low 3% range, at which time, pricing a stabilized asset at a 4% cap rate with upside would be acceptable to the market. As rates moved, so did buyer’s expectations of returns. Our team brought several offers however, because of the prepayment penalty, our client’s flexibility on the price was limited.
Believing in the quality of the asset, Lee & Associates Multifamily team diligently continued to market the asset, encouraging management to maximize rent increases during the marketing period to keep up with rising rates, and creatively positioning the asset to appeal to the wider market. During this time re-calibrating the expectations and recommending price adjustments to more closely align with market expectations.
Result
Though the desire to sell was primary, a back-up option was for the seller to refinance, albeit at less desirable rates. The team worked together with the client to play out both options and while a refinance scenario was being initially pursued, the team continued to work with inquiring investors. Then the team interviewed a buyer who was in a 1031 exchange, was well-qualified and able to make an all-cash offer. The team negotiated a fair price, eliminated contingencies and worked seamlessly with the buyer’s broker and the escrow team towards a smooth and timely closing.