Case Study: 231-235 Claremont Avenue, Montclair, New Jersey
The owner of this 15 unit residential assemblage contacted The Walters Group with the intent to sell. We performed a fully vetted Valuation on the site and determined that the most lucrative and least risk Added Value Scenario would be a Tenant Repositioning through Partial Development. Some of our consideration within the analysis:
- The 15 residential units were grand-fathered non-conforming. Ordinance within the OR-3 Zone would have had a “by right” yield of 10 units for a demo and ground up development approach.
- A Partial Development with current foot print retention would not have promulgated an Affordable Obligation. Any other approach would have.
- Condos were an option but there was a need for per floor square footage increase per HUD Regulation to facilitate fee simple ownership for some of the units. Seeking approval to extend foot print and or floor plan with grand-fathered use would have been at best challenging.
TWG performed a micro Added Value Analysis through the within Zoning use range. Development Feasibilities were run for every primary use candidate.
We identified, supported and presented to the regional investor community an available and previously unknown 300% Value Increase from Tenant Repositioning …. supported by Partial Development.
Our presentation of findings to seller was concise yet comprehensive showing all valuations with proofs and how the marketing of same was intended. There were two other firms bidding for the listing. Seller reviewed all proposals and awarded TWG with the listing.
We received multiple offers. All buyers were formally vetted. Per our recommendation seller signed an LOI having very good terms; it was not the highest offering number but ultimately provided the best total return.
Knowing the difference between Current and Possible Future Value(s) is necessarily precedent to garnering part of that difference at disposition!
Terms of the contract included a seller note hold garnering an interest income during the carry period of 12% of the purchase price and supported by a 35% down payment from buyer.
Upon acquisition the investor moved quickly to vacate all tenants and proceed as outlined in our Tenant Repositioning Strategy. All units were renovated, grounds were landscaped, parking access from the street was expanded and all utilities were separated.
Once the Tenant Repositioning Strategy was completed the asset had a Market Value of over 200% of basis and about 300% of the initial acquisition cost.
At closing our Seller Client, without disbursing a dime in capital improvement, received Market Value + 20% of the Tenant Repositioning Value Increase …paid for and executed by the buyer, after closing.