- CASE STUDY -
ADVISORY VS
TRANSACTIONAL
Our carefully-crafted client-centric approach
CASE STUDY
ADVISORY VS TRANSACTIONAL
Our carefully-crafted client-centric approach
The Details
LOCATION
Louisville, KY
UNIT COUNT
470
year built
2019-2021
There was a pair of developers who rightfully brought in the team of MMG Real Estate Advisors to complete a thorough evaluation of their property and situation. Based on their aggressive, strategic approach, MMG was engaged to handle the transaction. Super early in the process—we’re talking well before the property was even taken to market—a legitimate offer came in that was well within the targeted value range.
Early in the process a legitimate offer came in within targeted value range from a well-qualified buyer with recent executions as the “highest and best” bidder in the same market. The seller looked to MMG for guidance.
The Situation
For the most part, everything looked good on paper. The potential buyer was not only well-qualified, but had come to the table with reasonably good terms. It should also be noted that the prospective buyer had just recently prevailed in a competitive bidding process on a neighboring deal down the street, where they had been deemed the “highest and best” bidder and then successfully closed on that transaction. Consider it safe to say that the initial indicators on this deal were profoundly positive.
Ownership seriously considered taking the offer and reasonably so, as it was a seemingly strong bid. Not to mention, everybody would then have the pleasure of essentially calling it a day and going their separate ways which honestly, sounded relatively appealing, given that it would save everyone the trouble of taking the property to market with nobody feeling any worse for the wear from a dollars and cents standpoint. But not so fast. Before moving a muscle (figuratively speaking), ownership looked to MMG to provide well-informed, client focused direction
… Cue the advisement process.
The Strategy
Without blinking, the well-seasoned pros at MMG Real Estate Advisors told the developers exactly what they never thought they’d hear: “Don’t take the bid.” Like you, the sellers at the time were thinking, “Wait, what?! Seriously?” Even though the bid was in the targeted range, MMG was confident in the ability to do better for the client which ultimately, boils down to the difference between simply being transactional versus going with the strategic advisory approach. But of course, it’s always the client’s call.
For the sake of conversation, let’s call it “the road less traveled” (thank you, Robert Frost). The logic was that with a little bit of healthy competition, the property value would feasibly go up exponentially and the ultimate buyer would end up paying well over this bid as a result. Make sense? We thought so, too. The reality is that people generally operate in their best interest …
Why does a buyer go direct? For a deal! Because of the incredibly detailed evaluation at the onset, MMG had an intimate understanding of what was really possible with the asset, and just how far the needle could theoretically be moved on a transaction of this magnitude.
Now, without further ado …
MMG was confident in our ability to do better for the client than the off-market bid, despite it being in the targeted range. Because of the incredibly detailed evaluation at the onset, MMG had an intimate understanding of what was really possible with the asset, and just how far the needle could theoretically be moved on a transaction of this magnitude.
In doing what was best for our client, MMG was able to secure a bid $12 million higher than the initial pre-emptive offer.
The Outcome
Despite having the pre-emptive bid on the table, MMG took the property to market and ultimately, generated bids from every region of the country, and even some internationally. Here’s how it went down: The initial buyer stepped up considerably (10%) from their “best and final” opening bid. But the real triumph was when the ultimate buyer came in over $12 million higher than the initial, pre-emptive offer. MMG Real Estate Advisors followed the guiding principle of doing what’s best for the client, which has historically proven victorious each and every time …
Key Takeaways
While certainly very tempting, sometimes it pays (literally) not to take the path of least resistance and keep working the deal all the way through. If you have a direct bid, never feel like there aren’t more buyers in the marketplace. Further, you should always know there’s usually a reasonably high probability that the buyer would ultimately step up and pay more in a competitive environment, so it pays to take them through the process and not risk leaving money on the table.
