Local Multifamily into Local Multifamily
4670-88 DAWES ST. 92109 – 5 UNITS (DOWN-LEG)
INTO 2055 DIAMOND ST. 92109 – 8 UNITS (UP-LEG)
In Q4 of 2009, Palma Commercial secured the assignment to market and sell the 5-unit property 4670-88 Dawes Street in Pacific Beach (Down-Leg/Relinquished Property), a well-located, yet under-parked apartment property with deferred maintenance, built in the 1950s, with three 1br/1ba units at below market rents, one non-conforming studio (converted from garage), and one 2br unit.
The client’s goal was to trade into more units in a similarly good location, in order to: 1) get a newly adjusted depreciation life, thus lowering taxable Income, as they had owned it for over 27.5 years and had no more depreciation (tax) write off left; 2) have a more valuable property rising at the rate of inflation, serving to accelerate capital growth; 3) trade into something newer and/or with less deferred maintenance, as they had significant fluctuations in income from one year to the next, depending on repairs that would come up.
This investor had been looking for years before a Palma Commercial sourced their Up-Leg/Exchange Property, an off-market purchase opportunity in Pacific Beach, which was a well-maintained 8-unit property, built in the 1970s, comprised of six 2br units and two x 1br units, with ample off-street parking, in good condition, with slightly below market rents, at 2055 Diamond Street. At that time, the Down-Leg sale price was $890,000, and the Up-Leg purchase price was $1,500,000 (acquired with $750K from the Down-Leg sale proceeds as the down payment, plus a new loan of $750K). The client immediately noticed an increase in their return on equity and monthly cash flow, which was even more pronounced from an after tax perspective, with the newly adjusted depreciation and mortgage interest (tax) write offs. Today (7/2022), the Down-Leg property is estimated to be worth around $2,300,000, while the Up-Leg property is worth upwards of $3,800,000, so that move also accelerated this clients’ net worth and capital accumulation.
4675-97 MISSION BLVD. 92109 – 12 UNITS (DOWN-LEG)
INTO 4812 DEL MONTE AVE. 92107 – 16 UNITS (UP-LEG)
In Q3 of 2011, Palma Commercial secured the assignment to market and sell the 12-unit, 1950s-built property at 4675-97 Mission Boulevard (“Blue Diamond”) in Pacific Beach (Down-Leg/Relinquished Property, with zero depreciation life remaining, fairly significant deferred maintenance, and well-below market rents. This property was/is comprised of four 1br units and eight 2br/1ba units, with twelve off-street parking spaces and on-site laundry.
Palma Commercial remained diligent and listened carefully to the parameters of the ideal Up-Leg, ultimately facilitating the identification and procurement of the ideal Up-Leg/Exchange Property, a similarly well-located 16-unit property in South Ocean Beach, of relatively newer (1970’s) construction, and a superior unit mix with six 1br units and ten 2br/2ba units, in good condition with rents slightly below market. The Down-Leg sale price was $2,250,000, and the Up-Leg purchase price was $2,952,000 (acquired via Down-Leg sale proceeds plus a New Loan of $1,140,000). Once again, due to the acute focus on finding the right property within these premium/coastal markets throughout San Diego County, with very narrow acquisition parameters in this case, we were able to facilitate a significant improvement upon the clients’ financial position, as they again noted an immediate increase in their return on equity, as well as improved cash flow. Today (7/2022), the Down-Leg property (minus significant capital improvements completed by new owner) would be worth around $5,400,000, while the Up-Leg property is worth upwards of $7,800,000.