Valued at $16.3 Million at Acquisition in 1990,
Sold in 1998 for $25.5 million

Moore&Associates was retained by the lender to reposition the asset for disposition after the property was acquired via deed-in-lieu. The developer (not affiliated with Moore&Associates) had recapitalized the building and maximized leverage just prior to a dramatic weakening of the rental market. When Moore&Associates was retained the property had the following attributes:

• Forty five percent (45%) of the building was vacant or occupied by non-performing tenants;
• No cash flow was available after expenses to service debt or pay a return on equity;
• There were no "credit tenants", tenants were dissatisfied with the prior owner's property management, and the tenancy was not suited to the building's location;
• The building had lost its competitive advantage in the marketplace due to (1) the absence of capital investments, (2) its reputation as a troubled building, (3) the lack of leasing transaction dollars, and (4) poor property management.
• Office absorption was weak, and a high vacancy rate resulting from new deliveries, sublet and second generation space presented significant leasing challenges.

The lender directed that all operating expenses, capital investments and leasing transaction costs be funded from property cash flows, with any excess being used to reduce interest carry. Certainty of income was more important than increasing cash flow (i.e. taking greater credit risk for property appreciation).

In-line with the lender's objectives, Moore&Associates' Investment Strategy was to increase property cash flow by stabilizing the tenant base. Property cash flow would go as directed until the holding could be sold. Stabilization of the tenant base entailed (1) gaining control of suites leased to non-performing tenants, (2) leasing vacancies, and (3) renewing performing tenants early, "blending and extending" lease terms to bridge the market softness.

Moore&Associates opened an office on-site staffed by a full-time property manager and leasing agent. An aggressive marketing campaign was developed and executed, which targeted users well suited to the building's location. Proactive property management provided attentive tenant care. Selective capital investments were made to common areas and building systems.

Performance: Moore&Associates stabilized the asset during the real estate recession of the early 90's. We successfully brought the building's occupancy to 98% in the first year, generating a secure cash-on-cash return to the lender. All operating costs, capital investments and leasing transaction costs were funded from property cash flow. The credit quality of tenants was improved, including leasing 30% of the building to US Government. The building was sold in 1998 for $25.5 Million, $9.2 Million more than the value at acquisition, with no offsets or adjustments for deferred maintenance items.