L.A. Buyer Acquires 36 Foreclosed Condo Units

RIALTO, CA-Legend Apex Investments LLC of Los Angeles has acquired 36 units of the 40-unit Rialto Arrow Terrace condominium project from a partnership of two lenders for $3.8 million in a foreclosure sale, according to brokers from the Inland Empire office of Hendricks & Partners brokers who represented the lenders. Paul Runkle of Hendricks & Partners, who represented the sellers along with Brian Anderson of Hendricks, tells GlobeSt.com that at the time of foreclosure in October, the outstanding loan balance on the project was $9 million, or more than $250,000 per unit.

The buyer, who was represented by Coldwell Banker Dynasty, plans to operate the 36 units as rentals until the condo sales market recovers, according to Runkle, who estimates that the project needs approximately $125,000 of work in order to make all the units rent-ready. The development is at 1655 W. Rialto Ave. and began as a 40-unit condominium project in April 2006. From January to May 2008, four of the condominiums were sold to individual buyers at prices ranging from $305,000 to $309,000 per unit; the remaining 36 units were never sold.

Runkle says that the deal is comparable to the buyer acquiring a vacant building that–assuming the buyer leases up the building and assuming certain lease-up–would work out to about a 7.5% cap rate apartment deal upon stabilization. The units are 1,332 square feet each, with three bedrooms, two and a half bathrooms and a direct-access, two-car garage.

Replacement cost for construction alone would amount to about $200,000 per unit for comparable product, Runkle points out, so the buyer is acquiring the units at considerably less than replacement costs. He says the property attracted about 10 offers, and that, “Most of the buyers who were most aggressive looked at this as eventually retailing the condominiums at a later date, but keeping it as a rental for now.”

The project is a townhouse- style condominium complex of six two-story buildings and one single-story community building. Unit amenities include gourmet kitchen featuring granite countertops, double ceramic sinks, gas ranges and ovens, built-in microwaves, dishwashers and tile flooring. Common area amenities include the 1,200-square-foot community building, barbecue and picnic areas and a children’s playground.