Marking its first multifamily acquisition in Phoenix, the Bascom Group LLC purchased Stonegate Village at 2225 W. Frye Rd. here from its developer, Stonegate Village Chandler Place Holdings LLC of Dallas. "They plan on putting money back into that property via exterior and interior improvements, raising rents and reducing concessions," Brad Goff, a vice president in Phoenix for Dallas-based Trammell Crow Co., tells GlobeSt.com.
By Phoenix-area market standards, the 92%-occupied Stonegate Village's concessions were rather steep--one month free on a six-month lease; two months free on a one-year lease; and three months free on an 18-month lease for some units, according to Goff.Bascom obtained a three-year, $15.4-million bridge loan from Dallas-based DL Babson & Co., a member of the MassMutual Financial Group, at a floating rate of 2.25% over Libor. George Smith Partners Inc. of Los Angeles arranged the financing. MEB Management of Phoenix has been tapped to provide management and renovation services for the five-year-old complex.
Goff says Stonegate Village, listed at $22 million, received healthy interest from institutional investors across the country. Eight offers were made, six of which were deemed qualified bids under bankruptcy court requirements. Qualified bidders were required to post $750,000 in earnest money and complete due diligence up front. Bids started at $17 million and increased in $100,000 increments.
Goff says Bascom's ability to close quickly bolstered its bid. "They were an entrepreneurial buyer that had institutional-like funds, the nature to move those funds, and was able to secure this deal," he says. The transaction closed at a 6.73% cap rate.
Positioned on 18.2 acres near the 1.2-million-sf Chandler Fashion Square mall, Stonegate Village consists of 15 two- and three-story buildings with units ranging 729 sf for a one-bedroom apartment to 1,358 sf for a three-bedroom design. Rents average $972 per month.
Compared to other class A offerings in Chandler, Bascom landed a better-than-average deal. Goff says per-unit sales typically range from $83,000 to $85,000, but Bascom got the holding for $80,000.
Bascom representatives note timing as integral to the deal, with Phoenix's multifamily market enjoying a steady upswing following last year's bottoming-out. The buyer foresees healthy apartment demand despite a slow-down in construction, as job growth and interest continue to rise, according to a press release.
Bascom intends to invest $300 million in Arizona multifamily properties by year's end, eyeing everything from class A to D products. Goff and Bobby Bull, also with TCC in Phoenix, represented seller in the transaction while Bascom used its in-house team to complete the deal.
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