Franklin Street Real Estate Services announces the sale of a single-tenant office building in Pinecrest for $7,400,000 at $291 per square foot. The sale was the second half of a 1031 exchange.
Deme Mekras, Elliot Shainberg, and David Reinke of Franklin Street Real Estate Services represented the buyer, Miami Har, LLC, a private investor who recently relocated from Chicago to Miami. The seller, ATS Intermex, LLC, is a local private investor who owned the property for a little less than a decade.
“After working our way into the top buyer position in a competitive situation, navigating the terms of the loan structure quickly became the most challenging aspect of the deal,” Mekras said. “Intermex is a well-established and profitable tenant, but because they are non-credit it caused the lender to require substantial holdbacks and reserves to address leasing commissions, tenant improvement allowance and carrying costs for the possibility of having to re-let the space.”
Mekras continued, “Although the loan required a high degree of structure, the transaction was straightforward and there were many professionals involved that all collaborated on the execution for their respective clients.”
Franklin Street previously assisted the buyer of the Intermex property, selling his 112 unit multifamily property in Miami Gardens for $6,050,000. That deal produced $170,000 per year in free operating cash flow representing a return on equity of 5.4 percent. The majority of the proceeds from this sale were rolled into the Intermex acquisition via a 1031 exchange. The move will yield the client an annual cash flow of $230,000 – an 8.5 percent cash-on-cash return in the first year due to interest-only financing, falling to about a 7 percent yield upon amortization beginning in the second year.
“This is a prime case study showing how apartment building operators can take advantage of the marketplace,” Mekras said. “They have the opportunity to sell older, less-profitable, and far more management-intensive multifamily properties, then take the profits, shield them from taxes via 1031 exchange, and reinvest in newer, higher-quality, more-profitable, and less management-intensive assets.”
The single-tenant office building is 100 percent-leased to a longtime stable tenant, Intermex Wire Transfer, which recently signed a seven-year term extension. The property took less than 30 days from market to contract and about 60 days from contract to close.
“For our buyer, this transaction represents a 35 percent increase in annual cash flow, not to mention the other benefits of moving to a completely management-free asset where the tenant bears all burden of upkeep and pays all operating expenses directly,” Mekras said. “Additionally, the client moved away from a personally-guaranteed mortgage to a non-recourse loan with an interest rate of 5.2 percent, amortized over 30 years and fixed for 10 years.”
The Intermex building, which was completely renovated in 2005, is located at 9480 S. Dixie Highway in the Village of Pinecrest, a suburb of Miami.
About Franklin Street: Franklin Street is a family of full-service real estate companies focused on delivering value-added solutions to meet the evolving needs of clients. Through a collaborative philosophy of leveraging the resources, expertise, and experience of each of its divisions—Real Estate, Capital, Insurance, and Management—Franklin Street offers unmatched value and optimal solutions for clients nationwide. For more information on Franklin Street, please visit FranklinSt.com. Download PDF
