Who Else Wants, In Just 27 Months, an 86% Value Increase?

Case Study: Albany, Oregon office property

One of my favorite clients, a family who’ve really grown to be close friends, and partners on a few properties with me, sees hidden value where others do not.

This is part of their real estate investing superpowers. They see value left to be uncovered, much like Trump did with his purchase of Mar a Lago (for example, the art and furnishings at that estate were key, if you don’t know that story). And, they go after it, methodically, patiently, with dogged persistence.

Back in October 2022, we closed on an unassuming property in Albany. The purchase price was exactly $1,000,000. The property included a simple metal building, and an 8400 SF office built in the 50s, but, with recent renovations done, including a newer roof, newer HVAC and newer siding/paint. It had but one vacancy. But, would soon have two of four total spaces vacant.

This particular client typically likes to buy all cash or will go participate with very limited exposure to debt. Which I completely respect. Yes, the internal rate of return will be higher with debt leverage, but then you’ve got a partner in the property you may not want or always agree with and they become the tail wagging the dog. When you are in all-cash, there is none of that. Remember, risk and reward are two sides of the same coin. More leverage, yes, more reward, but also, more risk should the property enter a period of time where it does not perform. Another thing to consider: Without debt, you will make different, and perhaps better decisions than you might otherwise.

Back to this case study… After closing, we begin to market the vacant metal building for lease. After a few months time, a new tenant is found, installed, and the rent roll increases. With this new tenant, a restroom and hand washing station is added to the building, at a cost likely exceeding the cost of the original metal building, but, this creates a better asset for my client and for the tenant to use. It’s a sound capital expense that will return dividends for years.

Along about this same time, the big tenant cuts their space needs and thus, rent, at their renewal. We’re left with a 1600 SF office space to fill. Albany can at times be slow to absorb a new space, but eventually, we find a great tenant. So, after about 5 or 6 months, we fill that space. Then, 6 months later, the big tenant pulls up their tent stakes completely after 20 some years and they move to yet another smaller space. 

Back to the marketing game – we now have a nearly 6,000 SF space to fill. But, fill it we do with a beautiful 5 year lease, from a non-profit tenant that has been around two lifetimes, based in Oregon, and, not reliant upon government funds to stay afloat. 

All along, the team here at Pikes Northwest has managed the re-tenanting of the spaces, the tenant improvements, and, the leasing. We’ve also continued to actively manage the property and keep it in excellent condition. 

During the re-tenanting process, we also moved tenants to a NNN lease structure (tenants pay actual property taxes, insurance and operating expenses for the property). That tenant will roll at some point and will be replaced by a NNN lease. The NNN lease structure helps protect my client’s investments and keeps the increases of property taxes and insurance, two of the big and always increasing expenses, a tenant responsibility.

Now, February 2025, this property has based on a very fair 7% cap rate, a new value of roughly $1.86MM, based on the cashflow. That’s an 86% increase in value in just 27 months. (Doubling in 7 years is generally considered very acceptable.) All this in little old Albany, Oregon, and hundreds of investors passed right by this property, giving it little if any thought.

If this process is of interest to you, contact me to learn more. Perhaps we can help you achieve this same result!