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MESA, AZ-Two years after being acquired as a condominium conversion project, the 402-unit Falcon Glen Apartments returns to market again following a foreclosure. The distressed asset is being offered by the lender at an ask of $16 million, half of what the asset was bought for in 2007.

Carlsbad Development LLC had acquired the mid-1980s complex at 4225 E. University Dr. for $32 million, with plans to invest between $15,000 and $25,000 per unit to upgrade and offer them for sale. According to Marcus & Millichap Real Estate Investment Services’ associate vice president Alon Shnitzer, the conversion never took place.

“The owners hadn’t done much to the property before they ran into a bad situation,” says Shnitzer, who has the marketing assignment with Jacob Steele with Marcus & Millichap’s special assets group. Shnitzer tells GlobeSt.com that the lender foreclosed on Falcon Glen Apartments in late March 2009. Falcon Glen Apartments was the Utah-based company’s sole Phoenix area holding.

Because the 25-acre asset was being prepped for a conversion that never happened, its potential upside lies in deferred maintenance. Shnitzer says once the fixes are made, the rents can be raised. “Those rents are the lowest in the submarket,” he explains. “This should be operating at a much higher income, but the lender took it over only a month ago, and there was only so much they could do.”

The 92%-occupied asset is unique in that 80% of it contains two-bedroom units that resemble townhomes. Another positive is that it can be accessed from University Drive or Greenfield Road and the area attracts both blue-collar and white-collar residents. Shnitzer says the preliminary feedback received from potential investors has been very positive. The call for offers is due by May 20.

“This property hasn’t attracted many high-rent folks lately because of its condition,” Shnitzer acknowledges. “But with the right ownership and upgrades, it could be very attractive to that market.”

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