186-Unit Redwood Place Bought From Lender

Nathan Thinnes, vice president, acquisitions with ESI Ventures says the company wants to be an aggressive buyer, and wants that aggression focused on multifamily product. "It's the only product type you can finance these days, and the growth drivers are a lot more optimistic on the multifamily front than on the other food groups," he tells GlobeSt.com.

Thinnes says his company had been tracking Redwood Place Apartments at 2015 W. Cactus Rd. for the past nine months. When lender Vestin Mortgage took it back from owner Millennium Properties & Development Inc. in January, Thinnes felt it was a good time to make an offer.

"We like that this is near a heavy employment concentration and it's an infill location," Thinnes remarks. "There's no new supply coming on line and it's well-positioned, vis a vis the competition."

Apartment Realty Advisors vice president Bret Zinn tells GlobeSt.com that Scottsdale, AZ-based Millennium Properties & Development acquired the class C asset in 2006, with the intent to convert it into condominiums. Millennium Properties invested $4 million in upgrades before the condo market cratered. "Unfortunately, they got in pretty late in the game," says Zinn, who brokered the transaction between buyer and seller.

As Millennium Properties had emptied out the complex for the condo conversion, there wasn't a rent flow to fall back on, either. However, looking on the bright side, Zinn explains that the deal wasn't fractured, and could be sold as a rental. "We've had this on and off the market for the past two years," he says, adding that ESI Ventures' willingness to pay all cash helped cut down on the escrow period.

The complex is situated on nine acres and offers a unit mix of one- and two-bedroom units measuring between 700 and 1,000 square feet. Rents range from $625 to $960 per month. Consolidated Asset Management Properties Inc. will manage the complex, which is 59% occupied. Zinn says a number of units are still offline, but with ESI Ventures' additional capital investment, the property should eventually stabilize into a class B asset.

In terms of future acquisitions for ESI Ventures, "we'd love to find another Redwood Place," Thinnes acknowledges, adding that his company would like to invest $20 million by the end of 2009. "We'd like another value-add, multifamily, though we'll look across all product types that have a value-add component."

He explains that the company's hold position is about five years, noting that the days of the quick flip are over. "We're fully aware and prepared for the next years to be turbulent," Thinnes adds. "We're under no illusion that the market will turn immediately."