Asset Repositioning

Case Study

In 2000, Thomas Manz entered into a contract to purchase a former AT&T warehousing facility in Rocklin, California for $17,000,000. At the time, the property was being marketed for sale for $18,300,000 and had been on the market for over two years. It was originally listed for sale with an asking price of $23,000,000 based on an MAI appraisal at that value. The appealing aspects of the negotiated contract were very fundamental. By entering into a contract to purchase the 623,000± square foot building at just over $27.00 per square foot which at the time was approximately 50% leased to Hewlett Packard, ACE Hardware, PG&E and a logistics company. Additionally, the contract price included 80 extra acres of land that was entitled for an additional 700,000 square feet of building.

The initial objective was to further stabilize and bring the asset’s occupancy to 80%-90%. From the anticipated cash flow, Mr. Manz had strategized to fund the additional on and off site improvements necessary to construct the additional 700,000 square feet of planned buildings under a phased build out.

During this acquisition’s extensive due diligence, Mr. Manz and his team of consultants determined that the estimated $4,000,000 (as represented by Seller) of on and off site improvements was actually going to cost in excess of $6,000,000. This significant finding allowed Mr. Manz to successfully negotiate a $2,000,000 price reduction, resulting in the purchase of an asset with an appraised value in excess of $23,000,000 for $15,100,000.

Within six months of acquisition of the property, Mr. Manz was in contract to sell the asset for $21,000,000 to ACE Hardware Corporation (www.acehardware.com/corp). Mr. Manz was able to utilize his knowledge and expertise to provide ACE with a building engineered design to expand the existing facility to meet Ace Hardware’s need to have over 1,000,000 square feet of high cube distribution space.

This successful repositioning transaction not only benefited Mr. Manz and his investors, but most importantly allowed ACE Hardware the opportunity to relocate their distribution center within the same County. This close proximity relocation not only allowed ACE Hardware the ability to retain their current employee base, and add more as necessary, but also resulted in over 200 jobs being retained in the County of Placer.