Investors flip Reddit headquarters building in San Francisco for sweet return
[{"id": "d8gf7od", "text": "They bought for $27.3 million in 2014 with a $15 million loan. They just sold it for $45 million. Return on equity was close to 400%.", "replies": [{"id": "d8gh488", "text": "Real Estate baby!", "replies": [{"id": "d8grc0s", "text": "3xs from 2010 to now in SF has been happening some get even higher", "replies": [], "depth": 3}], "depth": 2}, {"id": "d8gxxbl", "text": "Renovation costs?", "replies": [{"id": "d8m9cd0", "text": "Don't know. Also don't know how much income the property generated over the holding period.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d8ghlpc", "text": "These stories never tell us how much (if anything) the investors paid for renovation, repairs, upgrades, etc.  It seems possible but unlikely the ROI is quite as high as reported. ", "replies": [{"id": "d8gpq5f", "text": "The biggest determining factor for the ROI was signing a 50k SF lease and selling it on the investment market. Repairs &amp; upgrades are going to be capitalized for each year before they were signed &amp; Reddit was probably offered $5-10 PSF in rental abatements (free rent repairs, paint carpet etc.), so probably $250-$500k would have been outlayed to sign such a tenant. Having a corporate tenant with strong guaranteeing credit on the lease pushes the cap rate lower and allow for a better investment yield on the rest of the property and newly signed lease.", "replies": [{"id": "d8gq36l", "text": "Big new tenant is certainly going to add value, but the article does not tell us how much they put into this older building in order to attract a new tenant like reddit in the first place.  Very unlikely they bought it and then did nothing to spruce it up.", "replies": [], "depth": 3}, {"id": "d8gzsrh", "text": "The amount of money paid just for the Reddit lease is definitely over $3,000,000. Broker fee is probably around $1M and TI's I'd guess would be around $50 (at the lowest), unless they did a pre-build in which case the cost is probably around the same. Coupled with the any free rent they gave Reddit and the loss from vacancy prior to that signing, the previous buyers spent millions to get this to sale. Probably still made a great return, but definitely not as high as this article leads you to believe.\n", "replies": [{"id": "d8i1xe2", "text": "I was going to say, $5-10 PSF including TI sounds way low. Probably $50/sf or more toward tenant buildout and several months of free rent.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d8gx9fp", "text": "I'm not too familiar with class A rents in my market but it is around $20-30 depending on the area and other amenities but it is so surprising that there is such a demand in the Bay Area for this housing and it is so expensive. ", "replies": [], "depth": 1}]