LANDOVER, MD-NOVO Development, a local developer, has closed on a Section 8 multifamily property here with the intention of taking it market rate. Located at 3691 64 Ave. in Landover Hills, NOVO acquired the 60-unit, six-story Capital Towers asset for $2.9 million.
Rick Struse and Cullen Kilbane O'Grady, associates in Marcus & Millichap's National Multi Housing Group, represented the seller, a local owner who was not disclosed.
Project-based Section 8 multifamily buildings rarely are brought to market rate, O'Grady tells GlobeSt.com. There were no comparable sales; the closest to this sale was a September trade of the Greenbelt-based Lawrence Apartments. This 48-unit property sold for $3.1 million.
The repositioning will not happen right away. In addition to being a Section 8 project, the property also comes with a Section 236 loan, which restricts the rents that can be levied. The seller is obtaining new financing and within a period of time will be able to convert it to a conventional property, Struse tells GlobeSt.com.
Average rents in the building are below market rate by about $150 per unit, he adds. For instance the rent for a one-bedroom, one-bath unit is $550. The rent for a three-bedroom, one-bath unit is $681. Most of the units in Capital Towers are Section 8, 16 of the units are conventional. "That is where the upside is for the buyer--the rents that he can charge when the entire building goes conventional," Struse says. There is 43,824 sf of total rentable space in Capital Towers.
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