Seeing the big picture

One of my agents is working with a client on an interesting deal and running into a problem.

The building itself is great – big, recently built, non-rent control, in an improving area, fair price.

The problem is that the current owners don’t have their act together. Missing leases, conflicting estoppels, deferred maintenance issues.

None of this is unusual; as I have written here many times no one sells you a great building at a fair price. They sell you great buildings at unfair prices or screwed up buildings requiring a bunch of work at fair prices.

This particular deal is an example of the later type, except that, as issues with apartment buildings go, these ones are pretty minor.

So, what’s the problem?

Our clients are detail-oriented people who are successful in their jobs. They run their affairs in an orderly manner and I believe it unnerves them to see this asset so poorly managed. They have therefore been wavering about whether to move forward with the deal.

This is totally understandable. But it’s short-sighted.


In our business, you need to think not about how things are but about how they can be. Then, you need to work backwards from your vision of the future to see whether you can make it happen for an amount of time / hassle / money to make the deal attractive to you.

This deal, with a little effort, looks like this:

  • $230 / sq ft
  • 9.8x GRM
  • 7.25-7.5% cap (unlevered yield)
  • 10-12% cash on cash return (!), depending on how they finance it

All of this on a newer, non-rent control building in an improving area.

Do you know what that is, particularly in this market? A home run.