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HOUSTON-DBP Capital LLC has bought the note for the 254-unit Chesterfield Apartments from American International Group Inc. The class C apartment complex initially was offered as part of an 832-unit portfolio by Frontier Land Ltd., but ended up selling at a below-market rate because the loan was due and refinancing was almost impossible to obtain.

The asset at 11735 S. Glen Dr. is assessed at $7.2 million by Harris Central Appraisal District, but the New York City-based buyer bought the paper for $3.1 million in an all-cash deal. Within five days of closing, DBP foreclosed on the west side property to wipe out remaining liens.

“This price sets the mark for what C properties are worth,” says Clifford P. McDaniel, principal with Apartment Realty Advisors in Houston. “This complex wasn’t in terrible condition and a lot of people were looking at it during the marketing period.”

McDaniel and ARA vice president Russell D. Jones brought Chesterfield Apartments to market in February on behalf of the Beachwood, OH-based Frontier Land. Also in the portfolio were the 244-unit Rainy Meadows at 12345 Bob White Dr. and 130-unit Ludington Apartments, approximately one mile south at 6655 Ludington Dr. A fourth asset, the 204-unit Summers Bend Apartments at 1111 N. Highway 123 Bypass in Seguin, TX, was taken off the market early in the sales campaign.

When Chesterfield’s loan came due in early summer, AIG bought the note. Then it required a federal bailout, forcing the New York City-headquartered AIG to sell Chesterfield’s note to DBP. Tom Wilkinson, licensing broker with KET Enterprises Inc., represented the well-known buyer of distressed commercial real estate loans.

McDaniel tells GlobeSt.com the new owner will invest another $1 million into the 26-year-old property, lease it up and hold it for two to three years. The 65%-occupied Chesterfield Apartments has one- and two-bedroom units in 23 buildings. Unit measure 531 sf to 1,262 sf and rents range from $430 to $735 per month.

“DBP owns other apartment complexes in the area. They bought notes on them to get into the Houston market,” McDaniel says.

As of now, Rainy Meadows and Ludington, both built in the 1980s and located in the southwest submarket, remain for sale. McDaniel says Frontier Land received offers of $21,000 per unit on the two complexes from other buyers, but decided not to sell at that price. He says Frontier Land does have the option to refinance the two assets when the loans come due in 2009.

Frontier Land didn’t have the refinance option with Chesterfield, however. “The difference between these and Chesterfield was that refinance costs would have been too high,” McDaniel explains.

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