Fairmont Apartments (pictured)
and Pine Meadows from foreclosure.
ABILENE, TX-A messy escrow period that saw one potential buyer falling out, along with contention between general partners that once owned a 498-unit local two-property portfolio, ended on a positive note, with Juniper Investment Group taking ownership rights to the Fairmont and Pine Meadows Apartments. When the dust settled, the Houston buyer paid approximately $11 million to buy the 1970s multifamily properties from foreclosure.
The original sellers in question were part of a Hawaiian entity operating under the name of Gratitude Group Texas LLC. According to Robert Aiello, vice president, brokerage and financing for Dallas-based Wells Asset Management, a lot of bad blood existed between the selling entities.
“We first got involved with these properties in April, 2011 when my company was contacted by one of the sellers,” explains Aiello, who helped market the properties and close the transaction. He says the seller’s intent originally was to put a loan on the properties – until Aiello learned both were in bankruptcy. “I told the seller that you can’t get a Fannie Mae loan when you’re in bankruptcy,” comments Aiello, somewhat wryly.
Aiello tells GlobeSt.com that one partner attempted to refinance to buy the other partner out, a process that went on for months. Then the bankruptcy court was added to the mix when Wells Asset Management had to obtain approval from the bankruptcy judge to sell the assets.
Even the marketing and escrow process wasn’t smooth sailing. “We originally had these under contract with a buyer out of Iowa, but it fell out,” Aiello notes. “Then the buyer from Houston came in and snapped them up.” Aiello goes on to say that a national marketing plan attracted 15 potential bidders, which were eventually narrowed to eight potential buyers, then one.
The properties were constructed in the 1970s and, according to Aiello, require a great deal of deferred maintenance, not to mention a $2 million capital budget for repairs. “The refrigerators in the units are green,” Aiello observed. “There haven’t been green refrigerators since the 1970s.”
On the positive side, however, both assets are cash-flowing and offer tremendous upside in that the rents are at least $100 below market rates. “If you were willing to spend a little money on them, you could hold them for a long time,” Aiello observes. “There’s little new construction in Abilene, and it’s a very tight rental market.”
For Juniper Investment Group, there is also another benefit when it comes to economies of scale. The buyer already owns another Abilene multifamily property, the 288-unit Cimarron Apartments at 500 North Judge Ely Blvd.
Now the buyer owns:
- The 224-unit Pine Meadows Apartments at 2500 Nonesuch Rd., which was 75% occupied at the time of closing.
- The 294-unit Fairmont Apartments at 2601 Nonesuch Rd., which was 90% occupied at the time of closing.