- CASE STUDY -
VS FUTURE POSSIBILITY
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OPERATIONAL CHALLENGES VS FUTURE POSSIBILITY
Let us expand your business and find your next opportunity
St. Louis, MO
There was an incredible, multifamily townhome community located in St. Louis, Missouri that at the time, was the newest vintage asset in the sub market with strong attributes and a highly viable location. We’re talking phenomenal looking, and wildly attractive with maintenance-free exteriors and if that wasn’t enough, the property also comped out exceedingly well. However, the gorgeous property came with a bit of baggage because the reality was that as the saying goes, and many of us know, appearances can be deceiving.
An otherwise attractive townhome community faced serious operational challenges after the operating partner and management company parted ways. This resulted in declining occupancy rates and terrible collections.
Here’s the skinny: What looked good on the outside was actually what one might describe as a work-in-progress on the inside. The property was operationally challenged and just not performing well as a result. Now, mind you that by no fault of its own (technically speaking), the property had essentially gone from near capacity at 95% occupancy with exceptional collections down to just 47% occupancy with terrible collections in a period of 14 or so months. The seemingly abrupt decline was a direct result of the operations that were in place at the time, which weren’t reflective of the property’s limitless future potential, at least theoretically based on its attributes.
What had happened was that the operating partner and the management company went their separate ways and as you can imagine, the situation progressively spiraled downward from there. Desperate to stop the metaphorical bleeding so to speak, ownership engaged MMG Real Estate Advisors to complete an insightful valuation of the property–bingo! After MMG delivered clarity in the form of an incredibly well-informed strategic evaluation, the client did what any reasonable person in their position would do: dim the lights, cue the sound, and give the go-ahead for MMG to take the property to market.
Dying to know what happened next? Us, too! But first, let’s talk game plan…
Leverage marketplace data and insights to aggressively sell the value-added opportunity by shifting the focus away from the clear liability at the operational level by presenting it as a short-term problem while simultaneously shining an ever-bright spotlight on the untapped potential and future viability of the property. Then, strategically position the property competitively, highlighting the notable mentions while showing that despite the noticeably poor performance, at the end of the day, it still has legs (aka “value”). Identify new capital, which we can all agree boasts the impressive ability to make most headaches go away.
First, present operational issues as short-term problem.
Second, highlight the value in the property and location.
Third, identify new capital.
MMG got the sellers out and recouped their equity in the deal. Then, MMG assisted new ownership with building a comprehensive business plan to reach a profitable exit.
MMG Real Estate Advisors managed to get the sellers out whole and recoup their equity on the deal, even though operations had been botched in such a way that most people rightfully thought had been damaged beyond repair and past the point of no return, especially the sellers. In fact, people were almost dumbfounded by the full recoup of the investment capital for the client. To take it a step further: new ownership was able to utilize the comprehensive business plan that was carefully curated and clearly articulated by MMG as a springboard for furthering their own objectives. Not only was the business plan fully-realized, but it was brought to fruition—the buyer was able to acquire the property, re-engineer operations, execute improvements, finance the deal, and then make a profitable exit. Talk about a happy ending for everyone involved!