In 2022, a long-time client’s father found a small medical investment that the family was interested in buying. Our client asked us to represent him in the transaction – which closed successfully – and has proven to be a tremendous investment.
Low and behold, the building immediately next door came on the market for sale shortly after our client closed on the first medical building. We toured at the time, determined that the owner was out of his mind with high price expectations and moved on. As we often do, we tracked that next door property and continued to check on status every few weeks.
Fast forward to 2024, and we were able to finally negotiate a good price for our client and opened escrow. That’s when the fun began!
There was mold. A lot of mold. Why? Well, because there was water. A lot of water.
Just the highlights of the building’s water adventures:
- The sprinklers outside meant to water the landscaping were largely pointed directly at the building. Since the building is wood frame, this likely wasn’t the ideal sprinkler positioning. The siding was falling apart and there were window frames with water damage so bad that we didn’t know how the glass was staying in-place.
- The central welcoming area was meant to be a pleasant atrium with sunlight gleaming down upon the patrons of the building as they approached the suite doors. Well, the last owner decided the skylights that were sheltering the atrium looked old and yellow. The solution? Just remove them. Rain is infrequent in Southern California admittedly, yet we do still have the occasional downpour. When that happened a few times in 2023, the atrium apparently flooded. Since the doors to the suites had gaps at the bottom, the water was welcomed into the suites right under the doors. The sandbags that the previous owner put in front of each suite door somehow just didn’t do the trick.
- The crown jewel of water damage? That would be due to the previous water heater. Did it leak? Not exactly. Let’s just say that when there is an overflow drainage pipe extending out of a building with a steady drip-drip-drip throughout the day, the solution to stop the noise should not be to put a cap on said drainage pipe. The water had no place to escape, pressure built up, and, well, the water heater located above the ceiling exploded. Now there was extensive water damage coming from the inside of the building as well!
So, with water attacking the building from sprinklers, from the clouds above, and from the exploded water heater, there was plenty of mold to mitigate and walls/ceilings/flooring to replace.
We thought we were done, but no! Up in the ceiling plenum there was insulation that apparently played host to more than one rat party. Rat droppings were a ‘plenty. There were holes in the insulation causing toxic rat dropping aromas to be pumped into the suites. Oh, and the insulation paper was installed upside down. According to the attic and crawl space expert we found to do the inspection all of the insulation needed to be removed, mold and rat droppings remediated, and new insulation needed to be installed. Apparently when you have one rat leave its mark, the smell will attract the rest of the rat crew until the insulation is replaced entirely.
Of course, there were also the more typical roof repair issues and HVAC repair/replacement, much of which was caused by neglect.
During our tenant interviews during escrow, we found out that the tenants occupying the building were understandably beyond frustrated with how the building was run and maintained.
We were able to document and quantify for the previous owner the expected costs to bring the building back to habitable condition. We made such a compelling case that the credit provided was more than sufficient to bring the building not just back to habitable condition, but to a high quality that enabled the tenants to experience a complete reversal of opinion about the property just 2-3 months after our client took over ownership and did what needed to be done.
The storm passed and calm prevailed. Perhaps more importantly, we were reminded that water is powerful and that drainage lines drip for a reason!
