Happy Friday. This is The Shake 🤝: the weekly newsletter summarizing historical events through the lens of real estate professionals.

We got another history lesson this week:

• Deal Deep Dive: Louisiana Purchase 🐊 

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Deal Deep Dive: Louisiana Purchase 🐊 

Real estate is timeless…

And the emotional roller coaster of purchasing property (large or small) is really no different today than it was centuries ago.

Let’s jump back to the year 1800 when North America was owned by 4 different countries; Spain, England, France, and the US.

The short but tenacious Napoleon Bonaparte recaptured the Louisiana Territory back from Spain through a secret treaty that stipulated France would provide a kingdom for the son-in-law of Spain’s king in exchange for the property.

Talk about a contingency… creative financing must date back to the Stone Age.

But there was another ‘well-capitalized’ group eager to grow their portfolio: The young United States 🇺🇸

Led by President (and GP) Thomas Jefferson - the US had its eye on capturing the 530,000,000 acre off-market property for its westward expansion.

Jefferson first bid for a small piece of the territory (New Orleans) in 1801 - sending one of his top acquisition associates, Robert Livingston, to France. Napoleon quickly refused, as he had a lofty vision of a western empire for his nation.

And just as developers dream of rezone approvals, Napoleon dreamed of conquering Haiti as a stepping stone to the North American region.

Similar to experiencing a brutally long and expensive entitlement process with an unfriendly municipality, Napoleon dealt with the revolutionaries of Haiti who fought to gain their independence. Depleting French capital and resources, Napoleon eventually had to pull back from the colony, disrupting his plans for western dominance.

I guess the construction timeline and budget weren’t going as planned…

It’s now 1803, and with finances tightening plus military escalations lifting in Europe, Napoleon realized he may have bitten off more than he could chew with the management of the Louisiana Territory.

His ‘reserves’ were running low and coincidentally the politely persistent Jefferson sent another deal maker, James Monroe, to France to negotiate the purchase of New Orleans and possibly some surrounding territory to secure American access to the Mississippi River and the crucial port.

Brokers – a reminder to keep following up with your prospects!!

Distressed (short) seller: Napoleon Bonaparte was now motivated by a combination of factors, including financial concerns, the difficulty of maintaining control over distant colonies, and the need to fund his military campaigns in Europe.

To the US’ surprise, Napoleon did all the talking and offered to sell the ENTIRE Louisiana Territory for $15 million ($349 million in today’s values). This amounted to roughly 3 cents per acre for the vast expanse of land.

The offer was unexpected and appeared to be a bargain from the US perspective, as they were willing to pay up to $10M for New Orleans.

Lesson: Don’t be the first to name a price…

But there were two problems:

1. Monroe was only authorized to commit up to $10M

2. The US government didn’t have the money

Ahhh the trials and tribulations of actually financing a deal are not so different nowadays…

So since the eager United States did not have $15 million in its treasury, it borrowed the sum from British and Dutch banks, at an annual interest rate of 6%.

There was also some creativity in the deal as the U.S. assumed responsibility for up to 20 million francs ($3.75 million) of French debts owed to U.S. citizens.

The remaining 60 million francs ($11.25 million) were financed through U.S. government bonds carrying 6% interest, redeemable between 1819 and 1822.

Now even though President Jefferson was the GP on this deal, he still had to take his LPs opinions into consideration.

Long story short, Jefferson faced some political opposition to the purchase within the House of Representatives, as the Constitution did not explicitly grant the president the authority to acquire new territory.

However, he recognized the strategic and economic benefits of the purchase and ultimately decided to proceed with the deal through his executive decision – trust that gut feeling!

Looking back, the Louisiana Purchase was the largest territorial gain in US history. 

The real estate transaction doubled the footprint of America and played a crucial role in the growth of our infrastructure.

I would say the deal drove an amazing ROI 💰️ 

P.S.

Suck it, France.

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^{DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.}