In February 2016, Denholtz Properties (“Denholtz”) launched an offering for a three-building, Class A office property located in St. Petersburg, Florida.
The property was acquired at a substantial discount to replacement cost as well as other existing, recently-traded, Class A buildings in the market at the time of purchase. In addition to the attractive basis, Denholtz’s business plan included adding value by converting the primarily single-tenant, office building into a vibrant and exciting multi-tenant destination. To make this possible, Denholtz had allocated nearly $8 million for renovation improvements targeting the lobby, corridors, and HVAC mechanical systems, and another $4.8 million for tenant improvements and leasing commissions.
Denholtz’s original underwriting and projections revolved around the property’s previous owner and primary tenant, the Tampa Bay Times, downsizing and leasing back approximately 110,000 square feet of the office space after acquisition. A few months after closing, everything was proceeding as planned and Denholtz sent out the first distribution to investors. The Tampa Bay Times, which previously occupied the entire building, was in process of consolidating its space into the three floors they would now occupy. This transition was scheduled to be completed by August, at which time Denholtz could begin the full construction work.
Most Complicated Renovations Completed
By mid-2017, Denholtz had completed the most complex projects including the installation of a new roof, renovation of the building’s HVAC system, full renovation of the main lobby, and upgrades to the three elevators. Exterior landscaping work was also well underway and the cafe and gym areas were nearly complete as well.
Successful Early Sale
Although with some reluctance, Denholtz ultimately decided to proceed with an early sale of the property, citing substantial profit created to-date, and more importantly, the potential risk of a failure of the Tampa Bay Times as a viable entity, which could not be disregarded. Throughout the approximate two and a half year hold, Denholtz contributed over $10 million in total improvements, which garnered 1st place for the Tampa Bay Renovation of the Year in 2018.
Highly successful execution of a complex renovation plan created the opportunity for Denholtz to successfully exit the investment approximately two and a half years earlier than planned, achieving strong returns for investors in-line with the original offering.
*Net of the most onerous fees charged to clients of CrowdStreet Advisors, LLC, our registered investment advisor subsidiary; an investor’s actual returns on a realized investment may differ.
This report contains explanations of a series of events associated with the 490 First Avenue offering that resulted in an approximate 18.5% (net of most onerous fees) IRR to investors (including those from the CrowdStreet Marketplace). Certain aspects of the report such as dates of major events and the final outcome are easily verifiable while others, particularly underlying reasons behind the sponsor’s business plan execution, are not.
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