Holding Through the Downturn

LOS ANGELES—Granite Peak Partners has sold Victoria Business Park, a 119,576-square-foot industrial park in Long Beach, CA, after holding it through the recession. The investor purchased the value-add property in 2007 with a three-to-five year business plan to reposition and then re-sell the property. Once the recession hit, Granite Peak Partners had to reconfigure its business plan to and has now been able to sell the property for a profit.

"Our plan was to execute a value-add strategy and improve some of the building elements, improve the landscaping and improve the tenancy, and then to hold for three to five years. That plan became eight years," Bruce Savett, principal ay Granite Peak Partners, tells GlobeSt.com. The company purchased the property in syndication with a pool of investors and has now sold the property for $15.13 million, generating a return of 4.25% to their investors, which Savett admits is a "modest return." However, he adds, they did not lose an investor through the process.

Holding through the downturn, especially when it requires a shift in strategy. Granite Peak saw the building tenancy drop to 60%. Part of the success story is that we were able to hold through the downturn. The bank threatened to take back the property because our cash flow went negative," says Savett. "Just in time, we executed a refinance as the market started to get better. By the time we sold it, occupancies were in the mid-90%." Savett wouldn't be specific about the details of the sale, but said that they received multiple offers and the property went to market without a price.

Although the investor was able to produce a return after eight years, which is an accomplishment, the sub-5% return for an industrial property in Long Beach, a highly sought-after market, isn't ideal. Still Savett considers this deal a win. "Typically when anyone buys properties, especially for a short-term hold, they are seeking double-digit returns," he says. "This deal, though, is a homerun because we went from nearly losing money to making money with a little bit of patience and hard work."