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September 22, 2014

Worth the Wait

Dan

Time and Attention Sell a Medical Office Portfolio for More than the Asking Price

Twenty-thousand square feet of well-maintained medical office space near two major hospitals, 81 percent of it leased to long-term reliable tenants—no great sales challenge, right?

That’s what we thought when we were given the sales assignment for three of the six buildings in the Medical Professional Plaza on Farmington Road near 8 Mile. With the University of Michigan and Botsford Hospitals as lead tenants, the portfolio seemed as if it would sell itself.

But investors balked at our early promotional mailings. The reason? The three other buildings in the office park have three separate owners, and all owners share common-area expenses through a condominium association agreement. Potential investors were seeing only the tensions and uncertainties of sharing upkeep of the office park with three other owners.

Consequently we received “strategic offers” from buyers hoping we would surrender and convince the seller to lower the price. At one point we began negotiations for separate sales of the two smaller buildings. But it quickly became apparent these negotiations were not in the interest of the seller.

Persuaded of the property’s strengths, we turned our attention to leasing its vacant space. Using our extensive contacts in the brokerage community, we found an MRI group that was instantly attracted to the 2,500 square feet of space in Building C of the complex. We negotiated a five-year lease with the group, which increased occupancy in the three buildings to 93 percent. Then we boldly raised the asking price.

And investors responded! Though we passed the one-year mark of the sales assignment, and though we continued to hear criticism of the condominium association structure, we now had multiple inquiries. We were not discouraged. Long experience told us we had a gem.

Our faith and perseverance paid off. One of our email promotions went to a Washtenaw County investor who saw that the condominium association was a small detail in the larger picture. More important in this medical office portfolio were the two long-term, committed tenants and property’s ideal location near two hospitals. And, as a experienced property investor, he had the deeper insight that the condominium association was in fact an asset: it provided rules and regulations for settling common area issues, rather than forcing owners to figure out the vagaries of unwritten rules.

The bottom line: we closed the sale above the initial asking price and with bank financing on a timetable all parties could agree to.

Yes, our marketing time was over a year. Yes, for months we had no serious prospects. But we kept the faith that if we continued to promote the advantages and benefits of this office investment, instead of arguing for lowered price from the seller, we could find the right buyer. And we did.

We can do this for your investment property. To learn how we can help, contact Dan Blugerman at the Thomas A. Duke Company: dblugerman@thomasduke.com; 248.476.7202.

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