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PHOENIX-Netwest Development of Tucson, trying to emerge from a Chapter 11 bankruptcy, picks up $17.2 million in an all-cash sale of two assisted living projects–a liquidation forced just four years after launching a major building program to serve elderly residents and low-income families in the Phoenix region.

The 120-unit Amber Lights of Tucson and 111-unit Silver Springs at Santa Rita in Green Valley assisted living centers went by way of auction. Low-income apartment complexes in Kingman are on the market, with a third affordable housing project under contract and set to close in December, Bernie Bajoras, Marcus & Millichap’s senior investment associate in Phoenix, tells GlobeSt.com. He and Jerry Walker, a sales associate, also are looking for a buyer for 109 acres in Bullhead City, AZ. The properties on the market are not classified as under-performers as those that came up for the bankruptcy auction, according to Bajoras.

SRG Holdings LLC of San Diego beat out 13 others at auction for the 99%-occupied assisted living centers. It wasn’t the easiest of deals to complete, says Bajoras, who represented Netwest and seven banks, led by Key Bank, in the sale. Schedule B alone totaled 672 pages and, says Bajoras, would have been an overwhelming task without the Internet. A separate Web site was set up to readily provide the paperwork to would-be bidders, each getting a password for access for due diligence and review of all document posting. “This was a benchmark in the industry,” Bajoras says.

Surprisingly, 14 buyers, each putting up $50,000 earnest money, stepped up to the auction block even though the properties were reporting combined earnings of just $1.1 million annually. It will take time, says Bajoras, but the properties can be repositioned into profitable holdings. “It will take a lot of hard work, but the guy who bought it is capable of getting the expenses and NOI in line,” he says.

At sale time, the properties were valued at $19.3 million in comparison to $35 million in July 2000, the same month that doors opened on Silver Springs at 500 W. Camino Encado. Amber Lights, located at 6231 N. Montebella Rd. in Tucson, opened in December 1999. Bajoras said it took the banks 23 1/2 hours to decide whether to accept SRG Holdings’ bid since one was lobbying long and hard for an $18-million minimum. He says the auction venue proved to be the most successful he’s employed thus far in disposing of distressed senior housing facilities.

Netwest Development’s sense of compassion might have forced its financial problems. Rent for some but not all tenants in the assisted living centers reportedly was just $600 a month, far below national and state average costs. And the $17.2-million sale definitely didn’t equate to a gift for the organization since the debtors, in this case, the banks got the proceeds, says Bajoras.

Netwest Development was pitched into a Chapter 11 filing at the end of last year, in what some industry analysts say was a last-ditch effort to dissolve its joint venture with Chancellor Senior Housing, the development arm of Boston-based CareMatrix that filed bankruptcy in November 2000. The joint venture only involved six of Netwest’s 14 communities and assets are said to be higher than its liabilities. Some relief, or a measure at least, will come from the sale of its affordable housing complexes and the land. The 156-unit Copper Ridge is priced at $6.2 million and the 144-unit Kingman Station, $4 million. The 109 acres is on the market at $2 million.

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