Extensive Deal Sourcing & Screening
Our objective is to see every transaction in our markets. We do so by maintaining a wide base of brokerage and owner contacts in our target markets, and are often shown transactions before they are openly marketed.
Millrock screens its pipeline for assets based on the following key criteria:
- Submarket Dynamics: the demand resilience and structural supply limitations
- Physical Attributes: the property’s quality and condition relative to its peers
- Location Features: the accessibility, prestige and convenience of the location
- Tenant Quality: the credit, diversity and stability of the rent roll
- Financial Elements: the risk-return (current and overall), ability to finance
Our extensive pipeline combined with our focused investment strategy allows us to be extremely selective on the deals we bid and buy.
Thorough Due Diligence & Prudent Underwriting
Millrock Partners conducts systematic due diligence throughout the bid process which involves synthesizing market and property analysis, independently corroborating all seller-provided information, confirming pricing assumptions, and coordinating external legal and engineering expertise. Millrock incorporates its findings into its underwriting that prudently reflects both the risk and opportunities related to a potential acquisition. The primary areas of due diligences that Millrock Partners focuses on are:
Market Due Diligence
- Interview and market tours with numerous leasing brokers in both the CBD and submarkets;
- Review and analysis of local real estate market reports (current and historical) including local newspapers and business periodicals;
- Review and analysis of economic data;
- Interviews with local real estate owners, developers, and attorneys.
Property Operating Diligence
- Review historical operating statements and budgets, rent rolls, tenant recovery billings, receivables, real estate tax and utility bills, service contracts, employee resumes, and other receipts and reimbursements;
- Interviews with all major tenants;
- Procure property appraisal;
- Review pricing with major service providers
- Build pro-forma budget using market information, historical numbers, input from third party management firms and owners;
- Review all leases and lease correspondence and estoppels, including abstracting by outside counsel;
- Build financial model from scratch using all underwriting information, and confirm new model ties with pricing.
Property Physical Diligence
- Procure Property Condition Report and Phase I Environmental Report, including reviews of ADA compliance, Plans and Specs, Licenses, Permits, Warranties, Fire Code compliance, and Certificates of Occupancy;
- Retain discipline specific consultants (MEP, Structural, Elevator) to review property condition and preventative maintenance programs; estimate base building capital expense needs;
- Review and analyze historical base building and leasing capital expenses.
Property Legal Diligence
- Legal review of all title, survey, entitlement, and zoning issues;
- Review of property historic litigation and insurance losses
Millrock Partners seeks to take advantage of the current stress in the real estate markets through strategic acquisitions in very select sub-markets in the Western USA. The Goal is to acquire Trophy Assets at prices below replacement costs resulting in pricing advantages. This strategy will minimize risk and maximize returns to our partners.
In addition, we seek to optimize capital structure throughout our ownership term, by:
- Maximizing flexibility to accommodate capital events,
- Minimizing debt service costs, and negotiation.
Proactive Asset Management & Investor Reporting
Millrock operates and manages assets to both a) maximize cash flow and b) improve certainty in tenancies, lease terms, operating expenses and asset condition. With this in mind, the Millrock property management team headed by Mr. Bruce Alexander creates an annual Operating Budget, laying out the annual objectives that will be achieved that year in terms of:
- Property Improvements,
- New Leasing and Renewal Targets, and
- Operating Savings
Millrock Partners maintains business plans for each asset so that strategic refinancing opportunities are continually considered and anticipated. We determine the appropriate holding period and capital strategy based on a coordination between property-level events (such as a refurbishment or major lease renewal), and opportunities in the financing markets.