(To read more on the multifamily market, click here.)

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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