Victory Hill East, Victory Gardens, NJ, with Kislak vice president Joseph Keenan

PATERSON AND VICTORY GARDENS, NJ—The Kislak Company brokered the recent $21 million sale of five multifamily properties as part of an Internal Revenue Code Section 1031 like-kind exchange for a longtime client.

The transactions included the $7.461 million sale of a four-property multifamily portfolio with 85 units in Paterson, Passaic County; and the $13.7 million sale of Victory Hill East, a 124-unit multifamily property in Victory Gardens, Morris County.

Vice president Joseph Keenan represented the sellers of the Paterson portfolio pursuant to an exclusive listing and also procured the purchaser. He also represented the sellers of the Paterson portfolio in the purchase of Victory Hill East and the completion of an IRC Section 1031 exchange.

“Joe did an outstanding job facilitating these transactions,” says Robert Holland, Kislak president. “He led our exclusive marketing efforts regarding the portfolio, procured the purchaser and then identified a great off-market exchange property in an excellent location for the sellers, who were very pleased with the results.

The Paterson portfolio consists of four properties with 85 units that had been owned by the sellers for over 20 years: one property with 20 units on East 31^st Street, two properties with 30 units on Sherman Avenue and one property with 35 units on 12th Avenue.
Paterson is a strong rental market given its population and proximity to New York City. It is the third most populous city in New Jersey with the second highest population density of any US city with over 100,000 people, behind only New York City.

After only a 14-day marketing period that resulted in multiple offers, the sellers selected the purchaser, a Bergen County-based family with substantial holdings in Paterson that was eager to add these well-maintained properties to their portfolio. All properties include on-site parking with separate utilities, and rents were below market. Rents in Paterson have been increasing at an average annual rate of 3-5 percent.

“When it was time to market and sell their Paterson portfolio that they assembled over the past 20 years, the sellers were confident in our ability to deliver,” says Keenan. “The purchaser plans to make interior renovations on turnovers and will raise rents accordingly.”

At the time of closing, the properties were fully occupied. The seller was represented by Jonathan Mehl, Esq. of Rutherford, NJ, and the purchaser was represented by Kevin Kelly of Kelly, Kelly & Marotta, Maywood, NJ.

“Once we made the Paterson deal, we worked very hard to identify the right exchange property,” says Keenan. “The length of the sellers' ownership mandated it. We called on many of our existing relationships and identified an off-market opportunity in Victory Gardens with significant upside potential only a few miles from another 100-unit property that Kislak had sold to them a few years prior.”

The property is located between Randolph and Dover in central Morris County with immediate access to Route 10.

“The Victory Gardens sub-five percent cap rate was aggressive even by today's standards, yet our clients saw the underlying potential of the largely neglected property,” Keenan says. “Below market rents, unnecessary vacancies given the market, poor management and a non-existent renovation program all pointed to ways to increase value in the long term.”

The seller and original developer of the property had minimal debt on it. Given this, Keenan helped to negotiate seller-provided financing that included an interest-only period that will allow the purchasers to implement a capital improvement and renovation program and raise rents quickly. Victory Gardens does not have rent control.

At the time of closing, the property was 94-percent occupied. The seller was represented by James Delia, Esq. of Wells, Jaworski & Liebman, Paramus, NJ. The purchaser was represented by Jonathan Mehl, Esq.

The property is located between Randolph and Dover in central Morris County with immediate access to Route 10.

Instant Insights /

209-Unit Portfolio in Passaic and Morris Counties in 1031 Exchange Worth $21 Million

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