Yesterday I closed on a deal that I had been working on for a full year. This was a 32 unit apartment building located at 2701 High Street in Oakland California. The owners called me off a marketing flyers we sent out in the summer of 2010. I remember clearly getting the call from Larry and Rebekka who owned the property. Larry is a fire marshal and I immediately set a meeting and met with him and his wife in their San Leandro home. We started the meeting with the most important thing an apartment broker can do, listen to their client. It turned out they had two 32 unit buildings they wanted to 1031 exchange into one larger building. I took detailed notes and got all the information about the buildings and went off to prepare a marketing strategy for selling two large Oakland apartment buildings. Little did I know it was going to be a full year of continuous meetings, showings and conference calls before we finally closed the real estate transaction.
The process of winning the apartment building listing over other competing brokers was the first challenge. I started with my broker and mentor Link Corkery by creating a very detailed and compelling marketing plan in powerpoint complete with video of the High Street apartment to set the stage. Since my wife works at Inman News, the leading real estate news publisher and technology hub, I had recently discovered some fantastic tools and statistics for improving real estate listings and increasing leads. Since I learned that the majority of people searching for real estate listings on the internet click on videos and photos up to 65% more often than standard listings, I knew I could blow the lid off the competition by flooding the internet with content.
I began by taking over 2 gigs of photos and videos of 2701 High Street. I walked through the building for hours taking photo after photo of each and every angle, room, corridor and feature of the builging. I then stitched them together using photysynth, a fantastic tool I learned about at the Inman Connect conference. I also walked through each corridor and room of the building and uploaded the apartment video onto Youtube so that I could use it in our presentation.
Link Corkery and I won the listing war over some significant competition from national firms. Some of the Bay Areas top apartment brokers were also vying for the listings on 2701 High Street and 691 Fairmount. After all the competing brokers did their presentations we had a final meeting and the sellers chose us. At the end of the meeting I asked Larry and Rebekka, what made them choose us over the other brokers? Their answer was “we just felt more comfortable with you, like you guys understood us better”. This was a big victory for Nick Myerhoff and Link Corkery. But the work had just begun.
The first open houses were awful. In 2010 the apartment market in Oakland California was in the dumps. There were only 6 transactions the entire year and there were very few investors looking at buying apartment buildings. There were very few lenders doing loans on apartment buildings in east Oakland in 2010 so finding a buyer was extremely difficult.
One component of the High Street apartment that made our job much more difficult was the fact that the building had 4 cell towers on the roof. The cell tower leases from Sprint, Metro PCS, Cingular and Clear Wire were generating substantial income for the owner. One would think this would add to the value of the building, however all it did was confuse buyers and muddy up the transaction. The final result was that we found a buyer for the cell tower leases independent of the apartment building. This was a very long and arduous process, learning about non-disturbance agreements, easements, escalator clauses and the bureaucratic cell company legal departments.
We ended up selling the cell tower leases through a fantastic company called AP Wireless in San Diego. We used a broker Chris Gianni who was incredibly knowledgeable in the area of wireless leases and cell tower carriers. One of our challenges was finding a purchaser who would forego the standard SNDA which most buyers require in order protect their asset in case of default. Most lenders will not include cell tower income in their underwriting but will want to have the ability to foreclose on the asset if debt service payments are not met. Cell tower lease purchasers therefore require lenders to sign an SNDA or a non-disturbance agreement which states that if the lender forecloses on the building that the cell tower income stream is not effected.
To make a long story short, once I began to understand the complexity of the non-disturbance agreements, the assignment of leases and the value of the cell income, I got on the phone and spent a couple days reaching out to every cell tower buyer I could find, soliciting offers from buyers who would meet our pricing and forego the non-disturbance agreement.
I was successful in finding Chris Gianni who I immediately became friends with as we navigated the intricacies of underwriting, approving and ultimately opening escrow for a simultaneous close. Last week we closed on 2701 High Street and immediately after Chris closed a separate escrow on the cell towers. Chris also poured over the cell tower leases and discovered some upgrades to equipment which had not been paid to the owner over the past few years. So we not only found a way around the 50 page legal document and SNDA, we also discovered an additional $5-6k in back payments for the original owner.
The transaction closed last week, and when I calculate the hourly compensation I received in commissions on the sale of a large 32 unit apartment building in Oakland California with 4 cell towers on the roof, it comes out to about $5/hr. And I am ecstatic about that! Why you ask? Because I closed this transaction and did the absolute best job I could. I worked with honesty and integrity from day one. I helped solve a very difficult problem for the owner and enabled him to move his investment out of Oakland and into San Leandro where we are now in contract on an upleg.
Through this process I have learned a great deal about what it means to be a top broker. It starts with one simple core value, honesty. And it all begins with listening very carefully to the individual needs of apartment building owners. Because I took the time to really listen, work hard and always stay in my clients corner, I was able to beat out the competition and help my client secure his families long term wealth.
If you own an apartment building or if you have ever wanted to own an apartment building, please call Nick Myerhoff to find out why multi-family real estate is a fantastic way to build long term wealth. If you have a cell tower on the roof of your building, please call me to find out exactly what it is worth.