Ilan Benshoshan Commercial Real estate Broker CRG Properties

Creating Value For our clients.

Creating value for real estate investors involves strategies and actions that enhance the profitability and potential of their real estate assets. Dealing with commercial real estate requires a deep understanding of the local market, the property’s potential, and the goals of investors. It’s important to conduct thorough due diligence, financial analysis, and market research before suggesting and implementing any value-enhancing strategy that we think will benefit our clients, regardless if they are sellers or buyers.

Below, you can find a selection of case studies detailing a couple of off-market deals I have recently been involved with. I acted as the sole broker for all of these transactions.

Union City New Jersey

2910 John F. Kennedy Blvd, Union City, NJ 07087

This deal was truly unique as it involved representing both the seller and the buyer in an off-market transaction. The sellers had previously owned multiple car washes but had made the decision to sell this particular one. I was recommended to them by a previous client to provide a price opinion on their property, especially after they had received a range of opinions from other agents, varying from 675K to 800K.

We successfully secured a buyer who was specifically seeking strong cash flow. Initially, I believed the property could be sold for $900,000. The existing income was $60,000, based on the previous car wash operator’s rent. This would have placed the property’s value at a 6.6 cap at the full asking price. However, I recognized that there was untapped potential, given that the current operator was on a month-to-month lease.

Ultimately, I managed to close the deal at $850,000 and also negotiated a tenancy arrangement for the new buyer. This arrangement generated close to $78,000 in net income, resulting in a 9.17 cap rate for the buyer, with the added benefit of a compounded increase through the long-term lease we signed.

Industrial NeWARK two Lots

205 Frelinghuysen Ave
Newark, NJ 07114

The complexity of this off-market deal arose not only from the financial figures but also from the challenging owner, tenants, and the poor property condition. The property owner had been attempting to sell this property for over three years. While the property’s valuation became a topic of frequent discussions between the owner and myself, his valuation of $2.5 million was significantly inflated and lacked supporting data. Taking into consideration the comps in the area and average property values, I calculated that, given the property’s condition, it should have traded for between $60 and $75 per square foot.

Additionally, based on income projections of $8 per square foot and factoring in a 40% expense ratio for a 16,000 sq ft property with a 6.6 cap rate assumption, I performed two valuation methods and arrived at the conclusion that the property’s true value should fall within the range of 1 to 1.2 million dollars. The property is situated within the special development district of Newark Airport and the Frelinghuysen corridor. Recognizing its potential, I understood that it would hold substantial value for an investor looking to add value or an owner seeking to establish their business headquarters.

Ultimately, I successfully secured a sale price of $1,795,000 for the property, equivalent to approximately $112.18 per square foot – a nearly 40% premium over the comparable properties. This outcome left the seller satisfied, while the buyer was enthusiastic about acquiring a property in a specially zoned area, anticipating future rental income following necessary property improvements.

nORth Bergen Cold storage Value add and REPOSITION

2011 8th Street, North Bergen, New Jersey, 07047

This one is by far one of my favorite repositioning and structured deals to increase the value-added and cash flow of the properties, using both conventional and unconventional ways to spot additional untapped upside that will affect cash flow drastically. The property is a 2.5-story solid brick building with approximately 55,000–60,000 sq ft of rentable space, including the cellar floor, which has about 12 to 14-foot ceilings and a huge freight elevator that goes down from the loading dock. The majority of the property was owner-occupied, with small parts of it rented to smaller food distributors for dry, cold, and freezer storage. It was an off-market transaction. The condition of the property was below par, and the management of it was loose. The owner wanted $8 million and change, which was high for a class C warehouse distribution center. Although the property was used as cold storage, which has a premium in itself, the refrigeration system was old and nearing the end of its life expectancy.

Long story short, I managed to secure a buyer at 7.7 million, and the seller was extremely happy, not bad for a return on buying the building for $700,000 twenty years ago. The buyer was content and had their work cut out for them in rehabbing the building. But that was not all; we gave him a leaseback on 11,000 sq feet at a temporary preferential rate of $15 per foot NNN. So when all is said and done and fully leased, the property should generate an annual cash flow of approximately $825,000. Just that alone can result in almost a 10.7 CAP.

Now, this is when things get interesting. We had half of the roof leased to a major cell phone carrier in the past 20 years. While talking with the owner many times, he always mentioned that the cell companies liked this particular area’s network position. I did some more research and found that this point was indeed extremely crucial for the cell tower companies. I related it to the buyer, and this resulted in a transaction with a group that buys cell tower cash flow by selling them a permanent easement to half of the roof for 3 million dollars. So now the building sits with the buyer at 4.4 million with an approximate 825K of projected NOI, bringing this property from a 10.7 CAP to a staggering 18.75 CAP. It’s an excellent return and a classic example that sometimes you need to look a bit deeper to find additional hidden value.

North Bergen Industrial Park Value Add

8555 Tonnelle Avenue North Bergen 07047

The 8555 Industrial Park in North Bergen was another off-market transaction I secured. When I spoke with the owner the first few times, he was in the middle of negotiating a deal with other buyers that he dealt with directly. He actually tried to negotiate a sale twice directly with two separate large groups. I left it at, ‘If you are not successful in selling, let me know. I think I can move it.’

He called me after two months and told me that his deals fell through and asked what I could do for him. After we talked, I realized that this property is not suitable for a large-scale development. This is what the other two buyers he negotiated with wanted. A large-scale development will require shoring of the property, a costly, time-consuming operation that can also involve environmental cleanup. So, this property is only for an as-is income-producing investor or user-owner.

The property was rented to multiple users with a total of approximately 110,000 sq ft spread across different sizes and sitting on almost 4 acres. The current owner held the property for a long time. I looked at the proforma and already saw the upside. At a few points in our conversation, I asked him what price point he was discussing with the other buyers. He mentioned that it was in the range of 12 to 13 million. I looked at the proforma and realized that there was enough upside for the deal to be attractive to a buyer and also enough room for me to get the seller a much higher price than he was playing with.

I secured a buyer at 14.35 million, and the seller was very happy. The buyer acquired a property with month-to-month leases averaging at $7 per square foot, which we are now repositioning to $16 to $20 per square foot NNN. When all is said and done, this property will produce between 12.5% on the rental income only to a 15% cap rate if renting the outdoor area for fleet parking and storage. An excellent outcome for the buyer. This property will be valued at 25 to 27 million at a 6% to 6.5% cap rate. There is plenty of room to adjust the cap rate to current market trends and cash out with a significant value.”

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