Former Condo Site Sells for Affordable Housing

Advanced Development & Investment won the deal in part because it was willing to close within a traditional escrow period, rather than the longer escrows of nine to 12 months that other affordable housing bidders were requesting, Darrow explains. "The challenge was that a lot of the affordable developers were willing to pay the price for the property, but they wanted escrows of anywhere from nine to 12 months to line up the tax credit financing for the project," he says.

The price that 330 N. Union sold for was undisclosed, but it's estimated that the cost of completing the project, which Advanced plans to build as affordable apartments, will be about $9 million to $10 million. The original developer had completed about $1.2 million of work on the 37,000-square-foot parcel before the project went into default.

Darrow, who had the property on the market for about two months before the sale, noted the many complexities in selling an incomplete construction project that was foreclosed, with difficult title issues and other problems. "We had city liens that were not wiped out during the foreclosure proceeding, lis pendens from contractors and numerous covenants from the city that pertained to the original project's entitlements that needed to be terminated," Darrow explains. Because his client was not the original developer, "Tracking down the history all of these issues and having title clear them was a very long process," he says.

Darrow adds that closing the deal also required the right kind of buyer. "A lot of buyers call me looking for these types of deals, but when it comes to having the stomach to see it through, it definitely takes a more experienced developer with a good team of attorneys and consultants, not to mention intimate knowledge of the city's departments," he says.

The 330 N. Union property went on the market after the joint venture of Sharp Capital Group and Axiom took title after acquiring a nonperforming loan on the property, one of a number of such deals that the Los Angeles-based companies expect to complete this year. David Shophet, vice president of acquisitions for Sharp Capital, told GlobeSt.com at the time of that deal that the company plans to invest in more than $75 million worth of distressed notes for commercial properties throughout Los Angeles in 2009.