Archon Group Pays $32M for 266-Unit Complex

MESA, AZ-A Philadelphia developer has sold the second of three Bala-branded assets for $32 million to Archon Group LP. The 266-unit Bala Desertscape, carrying a HUD loan and 5.33% cap rate, was the seller's only holding in the metro.

Apartment Realty Advisor's principal Brad Goff says Keating Building Corp. constructed the Bala Desertscape in 2001 at 5120 E. Hampton Ave. along with the Bala Sands in Orlando and Balawoods in Kingwood, TX. "They sold the one in Florida last year so Bala Desertscape was next," Goff says. "They have three properties about 3,000 miles away from each other so it was time to sell."

Goff tells GlobeSt.com that the escrow was long because it required a $20-million HUD loan assumption, with a shrinking prepayment penalty for five years beginning in 2009.

Although the 6% fixed-rate interest might have put a drag on the asset's initial value, Goff says "in a year and a half when Archon prepays that loan, and they probably will, there's the implied upside."

Goff says the listing generated good activity, but Archon was the logical buyer due to its experience with HUD loans and track record with the seller--Archon also acquired Bala Sands. ARA vice presidents Bret Zinn and David Cohen teamed with Goff to represent the seller while Archon executive Don Gibson handled the buy side's negotiations.

Goff says the new owner will do some light upgrades to Bala Desertscape although overall it's in very good condition. It's not known, at this time, if Archon is planning a name change to the property.

The 92%-occupied Bala Desertscape consists of 35 buildings with a mix of one-, two- and three-bedroom apartments. The average unit is 1,066 sf, with an average monthly rent of $982.

The seller, in the meantime, is holding tight to Balawoods. "He's keeping an eye on the market in Houston. When the time is right, he'll put it out there for sale," Goff adds.