Saddle Rock — Distressed Acquisition with NOI More Than Doubled

Saddle Rock was acquired in 2012 for $9.15 million as a distressed, lender-owned Safeway-anchored retail center with significant vacancy and near-term rollover risk. The opportunity was sourced internally through the leasing team, who identified strong tenant demand that had not been realized because the prior owner was unwilling to fund tenant improvements. This created the ability to acquire the property at a discounted basis with a clear path to stabilization through active leasing and disciplined capital deployment.

At acquisition, the center was approximately 73% occupied and generating approximately $709,000 of NOI. The investment was underwritten with elevated rollover risk, which allowed the partnership to acquire the property at favorable pricing. Leasing activity accelerated immediately after closing, including signing a five-year renewal with a major tenant during initial lease negotiations, significantly reducing early rollover exposure. Tenant improvements were underwritten at approximately $15 per square foot, while actual TI costs averaged approximately $9.05 per square foot over a five-year period, allowing the property to be stabilized with materially less capital than projected.

Occupancy increased rapidly following acquisition, and the property is now approximately 98% occupied with current NOI of approximately $1.6 million, representing a 126% increase over acquisition income. During the hold, a building within the center was sold separately for approximately $1.45 million in 2014, returning capital to investors while the remaining property continued to grow cash flow.

Based on a current valuation of approximately $21 million at 95% occupancy, the asset has more than doubled in value from the original purchase price. Including the building that was sold during the hold, the total gross value created from the investment is approximately $22.45 million.

Over approximately 14 years of ownership, the investment has generated an annualized return of approximately 15% on an all-cash basis and approximately 22% levered IRR. Achieving this level of return over such a long hold period is uncommon and reflects consistent execution, disciplined leasing, and long-term income growth rather than reliance on short-term market timing.

Saddle Rock demonstrates the ability to acquire distressed retail assets, stabilize through operational expertise, return capital during the hold, and produce strong double-digit returns over an extended investment horizon.