A Lesson in Putting Investors First: Reflecting on a Difficult Acquisition Decision

In this blog post, we revisit a critical decision made by Breneman Capital in April 2022.

Faced with a rapidly changing market, we opted to prioritize our investors' best interests over immediate profits, demonstrating the importance of staying true to our core values in the real estate investment industry.

A Promising Acquisition Opportunity

In April 2022, Breneman Capital was negotiating the purchase agreement for a 96-unit, Class-B, value-add opportunity in Phoenix, AZ. This property had the potential to become one of our most significant acquisitions to date. The previous owners had already rejected a lucrative offer, and after much negotiation, we agreed on a price that was a 30% discount from the previous highest offer.

A new investor was prepared to provide the largest single check for a Breneman Capital property acquisition in the firm's history. Our business plan was straightforward: enter the market, raise rents to the market level, and fully renovate the asset's interior and exterior. However, just days into the PSA negotiation, we backed out of the deal.

A Difficult Decision Amidst Market Uncertainty

Though we initially believed the asset would be an excellent fit for our partners and us, the market began to change rapidly in April 2022. We faced two options: proceed with a complicated business plan amid much uncertainty or cancel the acquisition and prioritize our investors.

At the time, it was not an easy decision. Canceling purchases can harm your reputation with brokers and sellers, but Breneman Capital has built its success on the idea that we only purchase what we personally want to own. The shifting capital markets and economic landscape made executing our vision considerably more challenging, leaving no room for error.

Ultimately, we chose to cancel the purchase, a decision we still remember making a year later.

The Right Decision in Retrospect

Over the past year, our choice to cancel the purchase has proven to be the correct one. Interest rates have skyrocketed, rents in the submarket have decreased, and construction costs have risen. Sometimes, the best decision for a firm is to sacrifice some of your own money and cancel a deal rather than pushing out a subpar investment offering and relying on hope.

We continue to actively search for investments that make sense in this market, evaluating and sourcing dozens of opportunities monthly. We remain committed to bringing you prime investment opportunities in the future.

Conclusion:

As we reflect on our decision from a year ago, we are reminded of the importance of putting our investors first and staying true to our core values in the real estate investment industry. Feel free to schedule a time to chat with us to learn more about investing with Breneman Capital: https://www.breneman.com/schedule-a-call

Sincerely,

The Breneman Capital Team