Strategic Tenant Negotiations Lead to Successful Colton Property Sale

Earlier this year, GM Properties’ Dustin Wheelan, Vice President Brokerage and Tim Frost, Property Manager, were engaged to sell a multi-tenant commercial building located in Colton, California. Comprised of 30 units, the ± 23,676 sf building had a 40% vacancy rate, which was on par with occupancy trends in the area. The owner had inherited the building from a family member and, following years of operation, decided to put the building up for sale. The GM Properties team listed the property for $3,150,000 as an investment opportunity, despite the challenging local market conditions.

GM PROPERTIES’ STRATEGIES

Not long after listing, GM Properties received two offers, but they came in below the asking price. The team held out for a stronger offer, which came through from an owner-user who required that the property be delivered vacant. This was a challenge given that many tenants still had active lease agreements in place, while others were on month-to-month agreements.

GM Properties agreed to vacate the property within a 30-day timeline and offered a price reduction should this goal not be met. To mitigate risk, GM Properties secured a non-refundable deposit from the buyer that ensured financial protection during escrow and the eviction process.

To clear the building, GM Properties negotiated with the tenants, issuing 30-day notices for those on month-to-month leases and offering buyouts to the remaining tenants with active lease agreements. The situation was further complicated by the presence of a pharmacy on-site, which required approval from the California State Board of Pharmacy before it could relocate. The buyer agreed to allow the pharmacy to remain in place until approval was granted by the board.

RESULTS AND CLIENT BENEFIT

GM Properties successfully closed the sale in July 2024, for a final price of $2,850,000, after a negotiated price reduction.

This outcome represented a strong result for the Colton market, where capitalization rates tend to be low for investment properties. The GM Properties team navigated the complex tenant negotiations and the added challenges of the pharmacy’s relocation with professionalism, ultimately delivering a favorable solution for the new property owner. Despite the risks and market conditions, GM Properties’ strategic approach ensured a successful closing, benefiting both the seller and the new owner.

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