The Power of Information


The Power of the Package
Do you really want to complete a transaction? Then you need to come to the meeting prepared to do business. That means having information in sufficient detail about your property and your client that will attract a taker for the property.
SEC Counselor, Steve Eustis, recently illustrated an excellent example of coming fully prepared. He attended the meeting in Portland and presented a package on September 10 that included apartments and adjoining self-storage units.
Virgil Opfer, who said that he had a client in San Diego who was looking for apartments with a good yield, approached him after the presentation. Did Steve have any backup information?
Did he ever! Steve had color photos, local maps, site survey map, rent rolls, operating history for the past two years, legal description, property tax information, information about onsite management, and a list of improvements made to the property over the past year. His client was offering the property at an attractive cap rate, in fact, it that was nearly twice the cap rate being offered by apartment owners in Southern California. Virgil was very impressed with the depth and quality of the information that Steve had brought to the meeting.
The property was located in San Angelo, Texas, with a population of 90,000 (yes, Steve had demographics too). Steve and Virgil discussed the possibility of Virgil and his client, Dean, flying into Midland, Texas and driving the short one-hour jaunt to San Angelo to look at the property.
The next morning, September 11, the entire world came to a complete stop as we learned about the tragedies in New York, Washington, DC, and Pennsylvania. There was little thought of deal making for the next few days. Second to the breaking news, the major issue was, with all airlines grounded, how to get home from Portland.
In the near standstill that followed September 11, it would have been very easy to just forget about doing a deal in Texas with a client living in San Diego.
However, when Virgil reviewed the offering material with the client, Dean said, “This looks great! It seems to be exactly what we are looking for. How do we put a deal together?”
Virgil told him, “Well, we don’t want to fly, but if we can get it under contract, we can drive to San Angelo in two days. Are you up for it?”
Dean said, “Start writing, I’m ready to go as soon as we can.”
After a few days of correspondence and negotiating, a deal was struck. The following Saturday, Virgil and Dean were on the road at 6:00 AM.
With Virgil driving, Dean went through Steve’s offering material again, reviewing every detail. At one point, Dean commented, “I sure hope that we will not be disappointed, like we were in Tucson.”
Virgil and Dean had been extremely disappointed several weeks earlier after a drive to Tucson, Arizona, only to find that the broker had grossly misrepresented the property. After a half-hour visit at the Tucson project, they just turned around and drove back to San Diego the same day. Facing a two-day drive to San Angelo, they were really counting on the accuracy of the material that Steve had put together.
By nightfall, they were in El Paso where they had a great Mexican dinner and stayed the night. The next morning was a fast-paced drive through the Texas desert. After leaving El Paso, there was nothing for miles and miles, except miles and miles. The fast pace was slowed slightly after receiving a speeding ticket in the middle of nowhere. The Texas Ranger was polite, but firm. When Virgil asked if he could just give him a warning, the Ranger stepped back and fired two shots over the top of the car and said “There’s your warning, but you still get the citation.” The cruise control was engaged for the rest of the trip.
Even after slowing down to the speed limit, San Angelo was reached by late Sunday afternoon. It was the first time to the community for either of them. Steve met them and started showing them the features of the property and the amenities of the town. Dean was delighted. The project was better than he expected and the location was exceptional. Both Virgil and Dean were quite taken by the attractiveness of San Angelo.
At dinner, with Steve, Dean expressed his enthusiasm and only hoped that the interiors would be in decent shape. The interior inspections were scheduled for the following morning.
In the morning, Dean, a general contractor, inspected every single unit, looking under sinks, and he even walked the roofs. He was not disappointed. In addition, the self-storage units next door were nearly brand new and were efficiently managed by the on-site apartment manager.
Tuesday morning was spent talking to the top executives at three local banks. All of the bankers were all very eager to accommodate the financing. A 40% down payment really got their full attention.
Dean asked if Steve would provide the professional property management and keep the on-site managers in place. Steve agreed to do so.
Virgil and Dean left Tuesday afternoon for the return trip to San Diego content in the knowledge that they had a firm deal on a very attractive property, with property management and financing in place.
The transaction closed within thirty days of the visit.
The point is that the visit to San Angelo would never have occurred had it not been for the complete and detailed backup package that Steve had brought to the Portland marketing meeting. That’s the power of the package!
Postscript
The postscript to the story is two-fold. First, under Steve’s management, the property is out performing all expectations, with the result that Dean is now earning an outrageously high rate of return on his investment.
Second, Virgil and Dean recently drove back to San Angelo to inspect two additional properties that recently became available through Steve. This time the information was again very detailed. Both of the new properties were exactly as represented and both are currently under contract with Dean to close in the next thirty days with the same Bank as the lender and with Steve as the property manager.
Oh yeah, just kidding, the Ranger didn’t really fire any warning shots over the car.