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  • Writer's pictureAndrew Brain

Brain Group Performance Report & Case Study



Brain Group was founded in 2015 with a mission and business model to succeed and reward investors through its strategy to identify, embrace, invest alongside its partners and capitalize on opportunities that others have bypassed.


Take, for example, the Westlake Shopping Center in Raytown. In early 2016, Brain Group acquired the 34,000 RSF center for $1.8 million ($53/SF) and Brain Group contributed 1/3 of the equity. The center was fully leased with Westlake Ace Hardware occupying 24,000 SF and NAPA Auto Parts the remaining 10,000 SF. NOI was projected at $156,000, a cap rate of 8.71%. The property also included a one- acre pad site that with the correct strategy could provide additional revenue. We were forecasting an IRR of 15% even with our very conservative underwriting. Showing that even in a close-to-worst case scenario, because we were buying it right, we had a downside return that was still pretty good.


During the Due Diligence Period, we secured a 10-year renewal from Westlake. We also leased to Scooters Coffee a patch of grass that was otherwise unusable, which added $18,000 in NOI and pushed the cap rate to 9.5%. In 2018, we not only secured a five-year renewal with NAPA with 3% annual rent increases, but we also sold the pad site to Panda Express for $400,000, far exceeding our projected price of $250,000.


In December 2019, we sold the remaining property for $2.55 million. We increased the NOI to 27.5% and lowered the exit cap rate to 7.8%, Overall, we generated an IRR of 34% with an equity multiple of 2.42, including the proceeds from the Panda sale. Throughout the hold period, we distributed $520,000 to investors, an annual average dividend of almost 9%.


Brain Group’s uncanny ability in identifying sleeper properties, incorporating a values-alignment strategy, investing pari-passu to the other capital partners and implementing a long-term equity and performance plan to exceed expectations sets us apart from similar companies. We viewed the Westlake Shopping Center transaction as an opportunity to transform an underutilized property and to create positive social and economic conditions for our tenants, positive cash flow, and a great investment and return for our partners.

This property’s acquisition and sale is emblematic of Brain Group’s ability to focus on and leverage the opportunities of a given property. We succeeded on all fronts and exceeded our forecasts and expectations.



 

Other Holdings


MISSION PLAZA

Date of Purchase: 10/2020 Purchase Price: $5.05M Current IRR: 89%Current Equity Multiple: 3.21 Current Value: $7.7M


APEX 435

Date of Purchase: 4/2019 Purchase Price: $23.5M Current IRR: 55%Current Equity Multiple: 2.88 Current Value: $31.5M


SOUTHSIDE PLAZA

Date of Purchase: 11/2017 Purchase Price: $3.4M Current IRR: 45%Current Equity Multiple: 3.81 Current Value: $6.5


WEST PLAZA TOWER

Date of Purchase: 3/2018 Purchase Price: $6.475M Current IRR: 19%Current Equity Multiple: 2.26 Current Value: $10.5


 

About Brain Group


Our mission statement: “Through forward-oriented analysis and a unique values-aligned strategy, Brain Group seeks to create value for the company and its investors by identifying and acquiring underutilized real estate. By improving the properties, Brain Group creates positive social and economic conditions in which tenants, investors and the company prospers.”


Brain Group specializes in identifying unique and undervalued assets for repositioning and/or redevelopment. Our experience and success in real estate consulting and development and financial analytics and asset management allow us to help you identify and achieve the goals for your property or development.


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