The tenants, almost all military reservists, at Bighorn Ranch Apartments here were drawn to the area by good-paying jobs at the state prison. When they were called to active duty following the Sept. 11, 2001 attacks in New York City and Washington, DC, occupancy at the 440 Florence Heights Dr. apartment complex plummeted with more than 20 of the 56 units falling vacant by December 2001. And, there was no indication that things would get better anytime soon. "It's just not a market that could recover quickly from vacancies," John Kobierowski with Phoenix-based Hendricks and Partners tells GlobeSt.com, adding that new construction of low-cost, single-family homes in the metro area also cut into the complex's occupancy rate.
By February 2003, Bighorn Ranch was once again filling up with tenants attracted by the affordable rents of $425 to $525 for the one- and two-bedroom units and the area's fast-growing amenity base. Occupancy had reached 95% by the time the complex sold for $1.6 million to Craig Castleberry, a 1031 Exchange buyer from San Diego.
Even with its past vacancy problems, the deal couldn't have been sweeter for the seller. Developed in 1996 for $1.7 million by Bighorn Ranch LLC of Paradise Valley as one of the few "market-rate" complexes in the area, the firm sold the property for $70,000 less than its development cost.
"He looked at the property, understood what was going on and felt comfortable with it," Kobierowski says of a buyer who exchanged a duplex in San Diego to get into a larger holding. "Aside from the vacancy, it was a really smooth-running property. It never ran negative. It always had some positive cash flow." Kobierowski and Greg Thielen, also with Hendricks and Partners, handled the transaction for both parties.
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