Residential real estate is on fire in Maine New Hampshire, with buyers forced to act quickly and be willing to pay more to get the home they want. The same goes for real estate investors. A lack of inventory and significant competition has made it more challenging for investors to find the right fit property.
SVN The Masiello Group has seen this scenario play out many times in the past year. Real estate investors are driven by return on investment. With prices on the rise and the cost of construction materials skyrocketing, investing in residential real estate may not deliver the target ROI some investors are looking for.
Case Study: Millinocket Retail Opportunity
Real estate investor Uri Peer approached SVN The Masiello Group looking to invest in a multi-unit residential property. It was a real estate class Peer was familiar with, having invested in residential properties before. His goal was to increase the value of his portfolio and realize tax benefits through a 1031 exchange. However, the highly competitive residential and multifamily market limited opportunities for reaching these goals and Peer became open to other types of properties.
Because location was not an issue, SVN Sales Leads Chris Pascucci and Brian Dano opened a nation-wide search of commercial properties to find the right fit. By leveraging the Shared Value Network of SVN, which includes more than 1,600 advisors and over 200 offices across the globe, Pascucci and Dano were able to identify an exciting opportunity in Northern Maine.
The northern shopping plaza mall at 800 Central Street in Millinocket, Maine, was a commercial property opportunity ripe for revitalization. With some existing tenants, including The Tractor Co. and a locally owned restaurant, the 82,505-square-foot retail center had significant growth potential with the addition of new tenants. Millinocket’s existing infrastructure, business-friendly atmosphere, and its own revitalization efforts only added to the value and growth potential of the property.
Known as Maine’s biggest small town, Millinocket is located at the headwaters of the Penobscot River near Mt. Katahdin, Baxter State Park and the Katahdin Woods & Waters National Monument. Once a thriving paper mill town, Millinocket faced difficult economic times when the mill closed in 2008. In recent years, the town has worked to reinvent itself as a recreation hub and gateway to the stunning North Maine Woods wilderness.
Maine is an exciting market, with people from around the country looking to move to the state or relocate their business here. While much of the growth has been focused in the southern part of the state, investment has been spreading further north and inland. Millinocket’s existing infrastructure and close access to Interstate 95 make it a prime opportunity for those looking to invest in Maine.
SVN located the property in 45 days and the $1.6 million sale to Peer closed in June 2021. SVN will lead the leasing assignment effort.
Facilitating the Sale
Peer said SVN was instrumental in finding and securing a commercial property.
“I had the pleasure of working with Brian and Chris for the past 6 months. Their hard work during endless hours did not go without notice,” said Peer. “I truly appreciate the quick responses and the thoughtful advice. It was evident that my interest was their goal and working collaboratively as a team was a great experience.”
SVN not only aided in the property search but was there through every step of the deal-making process.
“Without Chris, who suggested the property I ended up buying, and Brian, who helped with the long, arduous, and hair-pulling process of negotiations, the deal would never have been made,” said Peer. “More than once both of them offered advice and shared from their vast experience, a fact that I greatly appreciated. Both offered and provided a much-needed support net, and I will definitely continue to collaborate with them.”
Peer and SVN agreed tax breaks and incentives from the Town of Millinocket were not needed in this case and preferred instead to move forward quickly without approaching the town about negotiations. [BLH1] Peer was able to take advantage of a 1031 exchange, also known as a like-kind exchange, to defray his capital gains tax liabilities. A 1031 exchange is a swap of one investment property for another. While most swaps are taxable at the time of the sale, investors that meet the requirements of 1031 pay no tax or a limited tax.
The Millinocket property, in the end, met the buyer’s criteria and achieve his goals, while also expanding investment and economic opportunity into rural Maine.