Kids Klub, operating a successful daycare in Pasadena, California for nearly 30 years, identified the subject property as its first out-of-state expansion in 2017. The company spent the next two and a half years preparing the building for occupancy, only to face COVID-related challenges when it finally received the licenses and permits to open in October 2020.
Challenge
The difficulty of hiring, parents’ hesitation to send their children, and the sheer amount of time required to manage operations made the business’s success an uphill battle. Nonetheless, Kids Klub persevered, until rising interest rates and declining property values made the owners reassess their objectives. At this point, determining market value for the property was complicated due to recent renovations, its specialized purpose, the shifting real estate market, and a lack of relevant comps. As a result, the owners needed to decide if they should push forward or move on.
Action
In August 2022, Aaron Kraft connected with Kids Klub and assessed the numerous possibilities available to his client. The owner determined that it was better to sell than lease, if they could sell at or above $8,950,000. They decided that the property would be more marketable vacant, so they needed to act fast with no revenue supporting the loan payments.
In response, Aaron implemented an extensive local and national marketing campaign, catering to all significant daycare and early learning providers. He also developed a website that displayed due diligence materials and established direct contact with local operators. By the time he placed the property on the market, Aaron had secured two offers, each surpassing the Initial Offering Price.
Considering the early offers, Aaron and the owner decided to remove the Initial Offering Price and modified the guidance accordingly. After 10 days of market exposure and 37 tours, they collected eight appealing offers from seven different parties. Subsequently, Aaron selected five groups to participate in a second round of formal bids, narrowing it down to two qualified buyers that both increased their offers and laid out their respective due diligence timelines in their final pitch to the Seller.
Results
Eight offers were solicited from seven qualified buyers
37 tours were conducted for 24 different groups
After achieving Mutual Acceptance, the Seller received $100,000 of non-refundable earnest money from the Buyer, with an additional $375,000 due within 30 days
To make certain that all bidders had sufficient funds to close, a financing contingency was removed from the final agreement, with the Buyer being required to provide proof of funds and engage in discussions with their lender
Sale Price of $10,300,000, 15% more than the Initial Offering Price
By engaging in the competitive bidding process, the Seller was confident they achieved maximum value for their property
Sale closed within 45 days of Mutual Acceptance with no alterations to the price or any concessions provided