Case studies

August 28, 2014

Value optimization

The acquisition strategy of HCRE has a successful history of accessing and investing in value-added properties in strategic locations with considerable upside potential. The goal is to reposition undervalued and underperforming assets with specific geographic advantages, deferred maintenance and restrictions to the access of capital. This case study of the Junction in Avon, Co. displays the HCRE strategy.

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The Junction is a premier shopping destination, including multiple shops and a supermarket. It is one of the several properties in downtown Avon owned by Hoffmann Commercial Real Estate.

History

On July 26, 2013, HCRE acquired the Junction located at the base of Beaver Creek Ski Resort in Avon, Colorado. The property contains 55,179 square-feet of retail space on five acres of land.

The seller was Citizen Bank who acquired the property at foreclosure for $18.5 million. HCRE closely monitored the foreclosure process and quickly identified the upside potential given the assets proximity to Beaver Creek Ski Resort, depressed rental rates and accompanying vacancy rate of 30 percent. Due diligence estimated millions of dollars of deferred maintenance and necessary capital improvements needed to stabilize the asset.

“HCRE successfully acquired the asset for $10.4 million, or $188 per square-foot, which was significantly below the $28 million that was paid for the property in 2007.”

The Hoffmann Standard

Immediately after the closing, HCRE executed its value optimization plan and committed millions of dollars of much needed capital into the project. Exterior improvements included aesthetic changes to color, landscaping, flags, tenant signage, monument signage and the installation of the largest private collection of Native American bronze statues in the West. Capital Improvements consisted of new roofs, roads and walkways. The entire project was redesigned and reconstructed, adhering to the Hoffmann Standard of Excellence.

Results Driven

Within six months from the acquisition, the Junction went from 70 percent to 100 percent occupied and rental rates doubled. HCRE has added more than 110 percent of value to the project in an extremely short amount of time with further value creation in the near future.