Real estate portfolio adjustment
By: J. David Chapman/January 20, 2022
I just sold the most emotional piece of real estate I’ve ever owned. It was the first investment property we ever purchased. This property is literally responsible for my real estate career. We made the purchase in 1999. It is an office duplex with 1,820 square feet on each side. In 2006, we purchased the corner lot next to it and built a 3,841-square-foot garden-style, two-story office building to house our growing real estate businesses. Over time, the office-duplex took on a quasi-retail focus with tenants looking more like retail businesses than office tenants. The complex of two buildings has had as many as 20 different companies occupying space in the development. Recently, we added the two 1,820-square-foot industrial buildings next door, bringing the portfolio square footage to over 11,000 square feet.
This commercial real estate portfolio accomplished what I believe is important in real estate – diversity. We were able to own office, quasi-retail and industrial. We were able to have a few national tenants and many small, local, entrepreneurial-type businesses. We were providing co-working space before it was a thing. We called it executive office space and provided a furnished office with telephone, internet access, a shared kitchen, bathroom and entry.
The other day I commented to a friend that I had never been sorry that I purchased any certain real estate property; however, I had been sorry that I did not buy a few. I think this comment says a lot about the business of real estate. Every property that I have purchased, knock on wood, I have been able to make work to accomplish some goal. It is not always easy, but you can always find a way to reposition the asset to cash flow. These assets were a great example. We were continuously repositioning the tenant mix and refinancing the debt to accomplish our goals.
It is not a big sale at just over $1.2 million. It will not make the newspaper. The tenants will likely not even notice the change of ownership. The bank will not miss our payment on the note. While all this is true, I promise you it will be difficult to drive past the area without thinking about where it all began.
J. David Chapman is a professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).