Inside the real estate industry, distress investors have scouted for deals in the wreckage of the office market. But the appetite for rock-bottom prices has extended beyond the usual suspects. While the private equity teams deploy their theses on location or vacancy rate and the REITs raise their billion-dollar funds, some regular businesspeople have gone with their gut to get in on the opportunity. This isn’t to say they’re unsophisticated, just lesser known.
Here, meet three of them:
A bargain in the eye of the beholder
When a downtown Chicago office building hit the auction block with a minimum bid of $2 million last year, it served as a Rorschach test for real estate pros.
Pessimists saw the shockingly low price for the property at 300 West Adams as a sign that Chicago would never regain its pre-pandemic prosperity. Optimists saw an investment that would pay off tenfold for those brave enough to take a chance on it. Igor Gabal was an optimist.
Gabal, a Ukranian-born investor, built a real estate career in the ’90s, buying apartment buildings across Chicago. In 2012, however, he sold off most of his holdings and later became President and CEO of Veroni Brands. The company imports and distributes European consumer goods ranging from high-end snacks and beverages to supplements and even painter’s tape.
The prospect of making his mark on the Loop by turning around the 100-year-old office building at 300 West Adams drew him back in. Gabal won the auction for it in late 2023 with a $4 million bid penciling out to $17 per square foot or about 8 percent of its last sale price. A 99-year ground lease contributed to the office’s unusually low price — but also hinders its profitability.
Alliance HP, led by ground lease expert Jay Shidler, bought the property for $51 million in 2012 and bifurcated it immediately. The ground lease started at $1 million a year and increases by 3 percent each year until 2042 when it plateaus at $2.5 million.
“They … are just trying to disturb the normal people who are willing and have the capability to do this.”
The office building was hit hard in the wake of the pandemic, and Alliance handed back the keys to its lender in 2021, while maintaining ownership of the land. It was over 40 percent vacant by the time of the auction.
Unlike some of Chicago’s behemoth skyscrapers, upgrades to the 12-story, 240,000-square-foot building could attract office tenants looking to downsize and prioritize quality amenities amid the rise of hybrid work, Gabal said at the time of the sale.
He is also considering repurposing the first two floors into a data center. The building is well positioned, he said, because of its proximity to a fiber route and its CenTrio centralized cooling system.
His optimistic endeavor hasn’t been without its challenges. In June, investors John Thomas and Chris Hansen sued Gabal, claiming they were secretly cut out of a deal to buy the building.
The case was dismissed in September but not before both sides engaged in public mudslinging.
“They have no wherewithal to execute and are just trying to disturb the normal people who are willing and have the capability to do this,” Gabal said.
Thomas said the lawsuit was decided on technicalities and that Gabal doesn’t have the level of experience necessary to turn around the asset. He also called into question the trustworthiness of Gabal’s partner in the deal, Ruben Espinoza.
Espinoza is facing a $35 million office foreclosure and separate allegations that he owes money to a commercial tenant, a receiver and a lender in amounts ranging from $300,000 to $3 million.
But Thomas’ career has been punctuated by controversy as well, including a stint in prison for business-related crimes and a 2022 bankruptcy.
—Emma Whalen
LA’s Pat Yan the “Meat Man” carves up a piece of the office market
Ever since Pat Yan pleaded guilty in 2018 for selling a half million pounds of mislabeled meat to grocery stores across Southern California, his reputation as a wholesale meatpacker has been somewhat tarnished.
But now, the Glendale office market might offer a chance for redemption.
Yan, who immigrated from Guangdong Province, China as a teen in 1989, and his wife, Kitty Jiang, amassed a small fortune over the last three decades running AA Meat Products, a meat processing and cold-chain logistics firm based in Commerce.
He might just leave that all on the cutting room floor since he’s now made his debut as an office landlord at 400 and 450 North Brand Boulevard, The Real Deal has learned. Kennedy Wilson sold the two nine-story buildings spanning the entire block between Milford Street and Lexington Avenue last year to someone who was then a mystery buyer for $60 million, or about $136 per square foot, which TRD previously reported.
Reached briefly by phone, Yan identified himself as the buyer in the 2023 deal. He declined to comment on his endeavors in commercial real estate. He doesn’t know if he’ll add more properties to his portfolio, but he said, “maybe — if they’re good ones.”
The deal wasn’t exactly cause for celebration in Glendale, where the overall office vacancy rate is 30.9 percent, according to a report from the third quarter of 2024 by CBRE. It made it painfully clear how much office valuations have sunk since 2017 when the North Brand Boulevard buildings last changed hands, fetching $144 million.
The Los Angeles County Clerk has no record of any new loans tied to the properties, and it’s unclear how Yan financed the acquisition.
Colleagues in the industry are warming to “Pat Yan the Meat Man,” according to a source with knowledge of the deal, who said that the carnivorous nickname seems to have caught on.
Yan owns industrial properties in Commerce and Maywood, where AA operates several meat processing warehouses. The company is bringing in about $1 million in annual revenue today, according to Dun & Bradstreet data.
That’s a pittance compared to the days when AA’s beef, pork and poultry products graced the shelves of California’s biggest grocery chains, including Lucky Stores and Unified Grocers, according to the company’s website.
Things began to unravel when federal safety inspectors made some unsavory discoveries about AA’s inspection-labeling practices in 2012, forcing the USDA to issue a massive recall of the company’s products.
In the criminal investigation that ensued, federal prosecutors hung their case on 44 pounds of scaled beef omasum tripe, 50 pounds of pork uteri and 200 pounds of duck feet — all of it improperly stamped with official inspection markings and sold to retailers, according to federal court records in the Central District of California. The couple was sentenced to five years of probation and AA was hit with a $1 million fine.
But the company pulled through. According to its website, AA will “strive for meat perfection.”
—Abigail Nehring
The local news hook, line and sinker
Andy Hansen is the owner of the tallest building in Fort Worth, because he reads the news.
That’s where he learned that Burnett Plaza, a 40-story office property built in 1983, was being sold at a foreclosure auction for, as it appeared, $12.3 million (a baffling $12 per square foot) after trading for $137.5 million just three years prior.
The shocking figure didn’t end up telling the whole story; it didn’t take into account the $68 million senior loan on the property, overseen by trustee UMB Bank.
Regardless, Hansen was hooked. He called up Pinnacle Bank, the lender that won back the building in a credit bid and, incidentally, a frequent financial partner of Hansen’s.
“I’m an entrepreneur at heart, so anytime there’s a quality asset and killer location that potentially is undervalued, I’m interested,” he said.
Thanks to a non-disclosure agreement, Hansen doesn’t have anything to say about the building’s former owner, Opal Holdings, which is run by embattled New Jersey investor Shaya Prager.
The foreclosure of Burnett Plaza shed a light on Prager’s use of a controversial ownership scheme involving ground leases throughout his portfolio. It also set off a domino effect of foreclosures in buildings around the country associated with Prager.
By the time Burnett Plaza landed in foreclosure, the building had piled up more than $1.6 million in mechanic’s liens.
Immediately after the building traded hands, Hansen started revamping it.
The renovation list includes: a $2.1 million chiller, several hundred thousand dollars’ worth of exterior repairs, tenant improvements, a lobby renovation and, potentially, a cafe in the lobby. Hansen also plans to add one floor of spec suites.
Overall, the property is in pretty good shape, he said. It’s currently about 80 percent occupied.
Hansen’s lack of an online paper trail may lead one to believe he’s just getting into the game, but he’s been investing in commercial property since the 1990s from a base in Stephenville, an hour and a half southwest of Fort Worth.
“At the time, anything was discounted,” he said. “Everything was kind of a fire sale. So we started buying distressed properties.”
He doesn’t raise money from outside investors and doesn’t even have a portfolio available online (“I don’t even know where to look for a list of everything,” he said), but currently, he owns multifamily, office and industrial assets.
Still, Burnett Plaza is by far his largest investment.
“We’re local. We care very much about the community, downtown and there’s just some great people that have weathered the storm there. We want to make sure that they’re taken care of.”
—Jess Hardin