How a looming 20,000-square-foot vacancy became a $6.8 million owner-user sale.
Every commercial property owner eventually faces a decision.
A major tenant leaves. The building begins to age. The market softens. Suddenly, the strategy that worked for years no longer makes sense.
The question becomes: Do you wait for the market to improve, or do you rethink the asset?
Recently, Michael Greene, CCIM, Luke Ramous and Hayim Mizrachi, SIOR, CCIM helped a client answer that question. What started as a plan to reposition a functionally challenged office building ultimately became a $6.8 million sale. But not because everything went according to plan.
In fact, the best outcome was one we never expected.
The Challenge
Our client owned a 23,804-square-foot office building in Las Vegas occupied by two tenants. The largest tenant, a residential brokerage firm occupying more than 19,000 square feet, planned to vacate at year-end. Only a 4,358-square-foot dental office would remain.
The owner wasn’t just facing vacancy. They were facing a fundamental shift in the property’s future.
Finding another tenant to occupy nearly 20,000 square feet of aging office space in a soft market was possible, but it wasn’t necessarily the best strategy.
Rather than asking, “How do we lease this space?” we asked a different question:
“How do we create the most value?”
Looking Beyond Traditional Leasing
After evaluating several options, we recommended a completely different approach.
Instead of pursuing another large tenant, we proposed converting the vacant portion of the building into shell office condominiums that owner-users could customize to their own needs.
The concept dramatically expanded the potential buyer pool while minimizing renovation costs by preserving major building systems already in place.
It also shifted the conversation from leasing space to creating ownership opportunities.
Our marketing reflected that strategy.
Rather than casting a wide net, we identified businesses whose leases would soon expire, companies experiencing growth, and organizations whose current lease payments were already comparable to the cost of ownership. For many of these businesses, buying the space could build equity, provide tax advantages, and create long-term stability.
The repositioning strategy was working.
Then something unexpected happened.
The Pivot That Changed Everything
One prospective buyer wanted to purchase the entire building. Suddenly, the business plan changed.
Instead of selling multiple office condos over several years, our client had the opportunity to complete a single transaction, eliminate years of execution risk, and accelerate their exit strategy by approximately three years. Recognizing that this represented a better outcome for our client required more than simply finding a buyer.
It required the willingness to abandon the original plan in favor of a better one.
Where the Real Work Began
Finding the buyer was only the beginning. Completing the transaction proved far more challenging. The existing dental tenant needed to negotiate parking rights, signage, and a lease amendment tied to the transfer of ownership.
The buyer encountered financing issues that ultimately required replacing an out-of-market lender with a local lender and restructuring the acquisition around SBA financing.
As deadlines approached, our team kept every party moving forward through constant communication, creative problem-solving, and careful negotiation.
Over the course of the transaction, the Purchase and Sale Agreement was amended 11 separate times. Closing was extended by approximately six months. Earnest money was released to the seller in stages, daily extension fees were negotiated, financing timelines were revised, and lease amendments were finalized. All while keeping both buyer and seller committed to the transaction.
At several points, the deal could have fallen apart.
It didn’t.
The Result
The property ultimately sold for $6.8 million as a single owner-user acquisition.
What began as an aging office building preparing for a major vacancy became an owner-occupied asset with an existing income-producing tenant already in place.
More importantly, the owner avoided years of redevelopment risk, multiple future sales, and the uncertainty of bringing six separate office condominiums to market.
The Lesson
Commercial real estate is often viewed as a series of transactions. We see it differently. The most valuable work rarely happens when a property is listed. It happens before that. When the strategy is being developed and throughout the process as circumstances change.
This transaction is a perfect example. Our original plan was solid. The final outcome was even better. Not because we forced the market to fit our strategy, but because we recognized when the market was pointing us toward a better one.
That’s what experienced brokerage should do.
Sometimes the greatest value we create isn’t just finding the right buyer. It’s helping our clients recognize the right opportunity when it appears even if it wasn’t part of the original plan.
For more information on our commercial brokerage and repositioning services, contact MDL Group today.
