In September 2021, Matthews™ facilitated a fully off-market acquisition of 2070 Las Palmas in Carlsbad for $6 million. The property was purchased at a significantly discounted rate, driven by a medium-term lease that was well below prevailing rental rates. The client’s initial business plan focused on holding the asset at a favorable cap rate while pursuing an early lease termination. After successfully negotiating a termination with the tenant, the property was re-leased at nearly double the inplace rental rate and sold shortly thereafter for $11.8 million in March 2023. The sale generated substantial equity gains for a client who was actively completing a 1031 exchange and needed to harbor proceeds efficiently.

 

Challenge

The primary challenge was twofold. First, the client needed to unlock value from a mispriced asset restricted by a below-market lease without disrupting cash flow. Second, following the disposition, the client required suitable replacement properties that could absorb significant exchange equity while balancing risk, return, and longterm growth. The market environment was increasingly competitive, particularly among institutional buyers, making it difficult to source attractively priced opportunities that aligned with the client’s objectives.

 

Strategy

Matthews™ leveraged an extensive pipeline of both on- and off-market opportunities to present more than 25 potential acquisition options. The strategy ultimately focused on acquiring multiple assets rather than a single large property to diversify risk and remain competitive in a pricing range dominated by private buyers. A diversified return profile was intentionally targeted, consisting of a fully stabilized asset, a light value-add opportunity, and a deep value-add acquisition. This approach allowed the client to balance immediate income with future upside while maintaining flexibility within the exchange timeline.

 

Result

The exchange resulted in the acquisition of three properties sourced directly through the Matthews™ deal pipeline. The stabilized asset, acquired fully off-market through a direct-to-seller relationship, was 1814 Roosevelt in National City, purchased for $3.54 million. This property was leased long term to Crash Champions and acquired at a basis significantly below replacement cost.

 

The light value-add acquisition was a multi-tenant business park at 1991 Don Lee in Escondido, purchased for $5.95 million and was fully leased at closing, with rents below market and near-term rollover providing embedded upside.

 

The deep value-add component of the strategy was 22702280 Meyers in Escondido, acquired for $2.05 million. This transaction represented the lowest price per square foot for a multi-tenant asset in Escondido in multiple years and featured month-to-month leases and significant deferred maintenance, positioning it for substantial repositioning potential.

 

This exchange increased the client’s portfolio size from 32,506 square feet to 52,598 square feet and boosted cash flow by 223%, successfully transforming a single value-driven disposition into a diversified, higher-performing portfolio.