Mallios Realty has just acquired 3109 Georgia Avenue NW in the up and coming Petworth neighborhood of Washington DC. Georgia Avenue is a major commercial retail strip as well as a major commuter route in and out of Washington. Petworth is a neighborhood in the midst of strong gentrification and growth. The site is about half a mile from the Columbia Heights Metro Station and about three quarters of a mile from the Petworth metro station. The Property is a 4,300 square foot three story commercial building that we purchased vacant. We leased the entire building to a single tenant prior to closing. Although the asking price was $1,300,000, we paid $950,000 to acquire the property. The price is equal to $221 per square foot. The tenant will use the building for a retail store, storage for this and their other three stores, and their corporate offices. The property is currently divided so it can be leased to three separate tenants in the future. The second and third floors are in excellent condition. We are completing some work to upgrade the first floor.
The Property is strategically positioned at the southern end of Petworth and on the east edge of Columbia Heights. There are a variety of retail, medical and commercial tenants nearby. The residential base in the neighborhood is very dense and seeing an influx of young professionals and millennial's. The immediate neighborhood is dominated by residential buildings and street level retail. The residential base is growing so we see appreciation in rental values over the coming years, which will result in strong appreciation of property values. The Local Market. The Petworth neighborhood has seen steady appreciation over the recent years. This pattern is expected to continue as areas to the east of Petworth continue to gentrify. Residential and commercial rents are expected to rise as pricing in the neighborhood is lower than other parts of Washington, resulting in anticipated rapid appreciation of the property. The convenience to downtown and nearby amenities attract local residents. The Tenant. The Property has been leased to Washington Hydro. They are taking advantage of Washington’s Initiative 71 which became effective in February 2015 legalizing the recreational use of marijuana. While the sale of Marijuana is not yet legal, Washington Hydro sells hydroponic equipment helping people grow marijuana in their homes, smoking apparatus focusing on upscale glass bongs, and branded t-shirts and accessories. They currently have three stores, in Georgetown, Adams Morgan and Woodley Park. Acquisition and Financing. We acquired the property with a conventional loan. We will continue to bring investors into the company until we completely pay down the loan. Return on Investment. Mallios Realty is offering shares in the company for $50,000 per unit. Initial Annualized Cash on Cash Return based upon the current property and lease is 6.29% year one, increasing to 9.55% year 3, with a 10 year average of 10%. This may change as additional properties are acquired. Based upon the expected increase in the 10th year rent, the investment will be worth two and a half times the cash outlay with an IRR of 14.85%. The expected frequency of distributions is quarterly. Because of the low debt goal we expect to commence distributions almost immediately. For additional information please contact Peter Mallios.