A THEORY OF RELATIVITY IN REAL ESTATE
The more I observe life in general, and real estate in particular, I find that seemingly random things can play a part in the solution when you connect the dots.
As case in point, I was recently retained to list and sell that venerable old self-serve car wash in Capitola by Nob Hill Center. As an initial shared Connection, I was referred the project separately by two different brokers in town as the person to handle the complexities in a potential combined sale of the business with the real estate. That alone was a nice vote of confidence, but the connections didn’t end there.
In the midst of bringing it to market, the property was red tagged due to the age of the structure, which the City felt was a hazard, and the first engineer I had look at it agreed with the City’s assessment, so the business was shut down and fenced off for safety. Connection Number Two was that the City planner happened to also be a client of mine, which I was careful to avoid directly invoking for any kind of special treatment, but it was helpful to know I was dealing with an articulate and friendly authority who would be open and reasonable.
We listed it at the price determined by the estate-ordered MAI appraisal, which had been predicated on the premise that the old car wash had served out its usefulness and that the value was based purely the land as a developable parcel. And the metrics of valuation for the business pointed to similar pricing based on Rule of Thumb multiples for car washes around the country, so we decided the logical thing to do was to market it simultaneously at the indicated value of a little over $1 Million to developers and entrepreneurs alike to double the exposure and see which group responded more.
I was immediately deluged with business buyers offering to pay several hundred thousand dollars above the asking price and having me represent them so I could get the buyer-side commission as additional incentive, and one over-eager broker from out of the area tried to circumvent me to pressure the Seller and her attorney to deal direct. It was clear that there was much higher demand than we had initially anticipated for a closed-down car wash, so we let everyone know they needed to wait a week to allow all interested parties a fair chance to participate. We eventually received 7 offers, with the top 3 all over the $2 Million mark, and ended up not only doubling the exposure but also doubling the price.
There was still the issue of the red tag, which could require full replacement of the structure at significant added expense, but as fate would have it, Connection Number Three was made when I remembered a recent structural engineer whom I had shown a small office space for lease a few weeks earlier, looking to start her own practice in the area, and I called her back on a hunch. Turns out she had over 30 years experience as an engineer for Cal Trans and was intimately familiar with steel structures, specializing in their construction and restoration. Based on her preliminary analysis she was confident she could devise a solution to enable the buyer to apply for a simple roof system replacement which will help preserve an existing encroachment easement, instead of a full structural permit which would have been a much longer and more costly process.
Sometimes you can’t help but think that it’s all relative.