Anaheim, CA

The Ask

The clients, experienced commercial real estate operators, had two main questions: 1) Should they proceed with the purchase of a triple net (NNN) lease retail property?2) How longshould they hold the asset to maximize returns?

Overview

The prospective buyers through an LLC owned and operated several commercial properties. However, the next opportunity they were eyeing was a deferred-maintenance retail property, in a market they were unfamiliar with: Orange County, Anaheim. The clients did have the beginnings of a plan in mind: renovate the property immediately after purchase, maintain strong fundamentals for an attractive and stable cashflow, and exit after a 7-10 year horizon with a target IRR of 15%.

However, being in an unfamiliar market didn’t lend them the confidence they needed to go ahead with the project at full-speed. The project, after all, would require an immediate injection of significant capital right after purchase. Some leases

were also due for expiration in 1-2 years. The clients needed maximum assurance regarding their ROI on the project. That is where Quasar stepped in.

Our Solution

The Quasar team conducted a robust pre-purchase asset and investment analyses for the subject property. We worked alongside the clients to flesh out their business plan. We ultimately gave them the confidence they needed to thrive in an unfamiliar market with our localized insights and detailed underwriting.

The Breakdown:

Final Recommendation

We knew the financials were make-or-break for this project. And indeed, that’s where the Quasar team honed in when making our recommendation. The property had strong rental history and stable NOI plus income from additional parking, and the operating and management expenses were reasonable. The project would be able to cover its debt obligations, whilst providing our clients with an attractive cash flow.

Our clients would also be able to recapture their renovation costs via depreciation. With the the break- even point occurring at year 7, the prospective buyers could exit within the desired investment horizon, with both an ATIRR and a BTIRR that would meet the required rate of return. An evaluation of the risk factors revealed no significant negative impact on the project’s return metrics even in the worst case scenario. With our go-ahead, the clients could move forward on their project, with confidence.