First Guaranty Exchange, of Sacramento, CA picked up the Pebble Creek Apartments at 950 E. Southern Ave. for $200,000 below the $4.8 million asked by Phoenix-based seller, Pebble Creek Mesa, LLC in a transaction that the buyer's agent says may be one of the highlights of this year's multi-family deals.
"It's probably going to go down as one of the best deals of 2003 for over 100 units," Pete TeKampe of Marcus & Millichap-Phoenix, tells GlobeSt.com.
The two-story garden style complex was about 26% vacant when it went on the market but the high vacancy rate didn't curb the interest of buyers, 11 of whom made offers during the 30 days the apartment community was up for sale.
"It was a very competitive bidding environment," says TeKampe, adding that although other investors outbid First Guaranty, the buyer managed to pull off the deal by agreeing to come up with a $1.2-million down payment, which made financing on the property easier to acquire.
It was sheer luck that First Guaranty was even in on the competition in the first place. The Sacramento exchange buyer wasn't even considering the Phoenix market until a Marcus & Millichap broker in Sacramento put the investor in touch with TeKampe. "They weren't even thinking about Phoenix," he says, "but it ended up being a very good fit."
The complex's high vacancy rate gave it great upside potential but what made the deal exceptionally sweet was its per unit cost, which put the apartments at about $7,000 less per unit than comparable properties.
"The buyer bought a building that didn't perform well financially but the price per pound was well below anything around it that was comparable," says TeKampe, noting that comparable properties in the same submarket are selling for more than $45,000 per unit and nearly $70 per sf, while Pebble Creek units sold at $37,704 per unit and $58 per sf.
He says the new owners plan to aggressively market the units to turn around the complex's floundering vacancy rate. TeKampe represented the buyer in the transaction. The seller was assisted by Darrell Moffitt of Marcus & Millichap in Phoenix.
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