RCS Investment Strategy
Successful real estate investing requires great care in the timing of both acquisitions and dispositions. A core skill at Real Capital Solutions is the ability to understand the macroeconomic forces that signal when to buy and sell real estate. Our principals and employees are highly analytical and watch cycles very carefully for signs of overbuilding or excessive valuations. Different than some real estate companies, we pay a great deal of attention to market signals that foretell excessive valuations and then act on those market signals.
Once the market signals indicate it is the right time to act, we then seek investments with opportunities to add value. We do this several ways, including through capital improvements, lease-up, development, entitlement or creative financing that otherwise might not be available in the market. Through experience, we have learned that the single most important factor in driving real estate investment returns is identifying and executing a plan to add value.
Below are examples of actual deals that illustrate our experience in adding value across commercial and residential real estate investments when the market signals have indicated it was the right time.
Commercial Value Add Case Study – Suntree Office
- Acquisition Date: April 2013
- Acquisition Price: $5.4 Million
- Total Investment: $6.4 Million
- Sale Date: May 2016
- Sale Price: $9.8 Million
Real Capital Solutions purchased the Suntree Office Complex in April 2013 for $5.4 million. The five‐story 74,793-square-foot building was built in 2006 in Melbourne, FL. RCS underwrote a conservative 40‐month lease‐up plan with a focused repositioning strategy centered on shifting the identity of the building from a corporate headquarters to Class A multi‐tenant office space.
At the time of the acquisition, the building was only 35% occupied due to general market conditions and the prior owner’s inability to fund necessary improvements to attract tenants.
Real Capital Solutions put in place an aggressive capital improvements and leasing strategy aimed at securing smaller five- to ten- year leases while offering competitive renewal rates, tenant improvement packages and incentives. RCS was able to stabilize the property within 28 months. The project was then sold for $9.8 million in month 37 of the investment, well ahead of the original 40‐month lease-up plan and nine‐year projected hold.
Residential Development Case Study – Water House on Main
- Acquisition Date: December 2012
- Acquisition Price: $3.0 Million
- Total Investment: $19.9 Million
- Sale Date: August 31, 2017
- Sale Price: $29.5 Million (Total)
In December 2012, Real Capital Solutions acquired a fully entitled condo pad in Breckenridge, CO, for the development of 29 residential condo units, plus in‐place improvements including a 43‐stall parking garage, infrastructure and utilities. The seller was motivated for a quick sale of the Phase II pad due to partnership tensions from an unrelated development, and RCS was able to offer speed and certainty of close, leading to what was a substantially discounted purchase price.
RCS was drawn to this project due to the low basis of the site, which was appraised at $4.4 million in February 2013, as well as the unbeatable Main Street location near Breckenridge Ski Resort’s Quicksilver chairlift. Additionally, the local market had seen very limited new product delivered in recent years. At the time of the acquisition, only two small townhome projects had been delivered to the market in the previous three years.
RCS completed the development and received the final certificate of occupancy in September 2015, at which time it had presold and closed 16 units with another three units under contract. RCS sold the final unit in August 2017, producing total revenues of $29.5 million.
Residential Development Case Study – MorningStar at Fountain Hills
- Acquisition Date: June 2015
- Acquisition Price: $2.0 Million (Land)
- Total Investment: $19.6 Million
- Sale Date: September 2017
- Sale Price: $30.0 Million
Real Capital Solutions, along with its operating partner MorningStar Senior Living, acquired 3.5 acres of land for the ground‐up development of a 91‐unit senior housing community. The project is a first‐class assisted living and memory care community, strategically located in Fountain Hills, AZ, to provide a high‐quality senior living option to the growing and underserved Phoenix MSA.
RCS was drawn to this opportunity due to the limited direct competition in the area and the experienced operating capabilities of MorningStar in a senior living space. Additionally, the developer of the project (a joint venture between MorningStar and the N-Shea Group) was also the master developer of the adjacent Fountain Hills town center. This allowed RCS to take advantage of strong relationships with both city officials and the current landowner, expediting entitlements and allowing for favorable land purchase terms.
The final product was completed $1.01 million under budget and was sold 30 months ahead of schedule for $30.0 million.
Commercial Creative Capital Case Study – 121 W. Wacker
- Acquisition Date: October 2018
- Acquisition Price: $118.5 Million
- Asset currently under joint management with operating partners
Real Capital Solutions and its partners Ameritus and Madison International Realty acquired 121 West Wacker in October 2018. RCS’ involvement was critical to successfully acquiring the property due to the company’s access to flexible, liquid capital and its entrepreneurial inclination in constructing a capital stack agreeable to all three parties. In the deal, RCS provided a significant portion of the equity (approx. $12 million) in a time-sensitive due diligence process that required swift decisions and quick funding. Pursuant to the investment plan RCS was profitably bought out by its partners in 2020.
121 West Wacker is a 41-story 441,000-square-foot office building located in the central loop in downtown Chicago, IL. Built in 1929 and having recently undergone extensive renovations and improvements, the property was 91.5% leased at the time of acquisition. The superb location at the corner of Wacker Drive and LaSalle Street offers great access to transportation, the popular River North neighborhood and the recently completed Chicago Riverwalk.