The Buyer: The buyer of these buildings has been in the market for as long as I’ve been alive. He’s purchased buildings for 2x the rent and he’s purchased buildings for 14X the rent. For him, this was a monopoly play. He owns dozens of buildings in this submarket and for him, even with the challenges of today’s environment, expanding his portfolio was paramount.
The Seller: There were really two sellers here. The general partner (the operator), and the limited partner (the equity). They purchased these buildings pre-HSTPA with the plan like everyone else: add value through turnover, IAIs and MCIs. Nearly a decade after purchasing the assets the cash flow was minimal, the values were down, and the lifecycle of the fund was expiring. There was no path out. A refinance at a higher interest rate would be a cash-in refinance rather than a cash-out and since values were down tremendously, there was no conceivable way for the operator to hit a promote. So why own it?