"We have demonstrated that investment in affordable, middle-class housing can be sound and profitable," according to Emmes president/CEO Andrew Davidoff, whose company earlier acquired many of the properties under financial duress and on their physical down cycle, and repositioned them for resale.

Included in the portfolio are two large developments, the 1,400-unit Eastchester Heights complex in the Bronx, NY, and the 1,170-unit Mill Run (formerly Stuyvesant Village) in Union, NJ. The portfolio totals almost 11,000 residential units that, at one time, served as collateral for two defaulted bond issues. Emmes worked with the receivers "to improve the properties, many of which were severely neglected," according to Davidoff. Emmes and its affiliated investors bought the mortgages three years ago from an investment bank and began the renovation process.

While no government incentives were involved in the latest transaction and earlier renovation, the NYC apartments within the portfolio remain subject to the city's rent stabilization regulations. Undeterred by that, Davidoff says that "this type of housing not only can be profitable but is critically important to the economic vitality supporting our general business environment."

And despite the sell-off, "we are looking for similar investment opportunities," according to Davidoff.

According to Emmes vice president Andrew Schwartz, "the original lender underwrote the bond issues in 1991 and 1993 to refinance a large real estate investor, but soon repurchased the bonds when the issues began defaulting. Litigation ensued between the lender and borrower, and the apartments fell into disrepair."

Besides capital improvements, Emmes has been working with local civic groups and law enforcement and social agencies to "restore comfortable and safe living environments," according to Schwartz.