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Value-Add Apartments Net $16M from Exchange Buyer

MESA, AZ-Phoenix-based S.F.B. Terrace Park Apartments LLC completes a 1031 exchange with the $16.3 million sale of Orange Grove, a 396-unit, class B minus apartment community in east Mesa. The 21-year-old property is a value-add play.

By Jennifer D. Duell | Updated on April 14, 2005

MESA, AZ-Orange Grove, a 396-unit, class B minus apartment community in east Mesa, has traded hands for $16.3 million. Phoenix-based S.F.B. Terrace Park Apartments LLC beat out 14 other potential buyers to get the keys to the 27-building community at 111 N. Gilbert Rd., Neil Sherman, an advisor with Sperry Van Ness’ Phoenix office tells GlobeSt.com. He and Danny Lee brokered the transaction. S.F.B. Terrace Park Apartments had traded out of a multifamily property in west Phoenix. The 21-year-old Orange Grove was sold by Lake Havasu, AZ-based Sylmar Terrace Inc., which had owned and self-managed the property since 1985. “This property was a very strong value-add opportunity because it was not being managed to its fullest potential,” Sherman says. In fact, several of the units were “down,” with the previous owner not making units available for lease when they needed repairs, according to Sherman. “The new owner is going to bring those units back online immediately and push rents,” he adds. According to Sherman, most properties that are available in the Valley come to market at full price and don’t offer any value-added opportunity. “That’s the rule and Orange Grove was the exception,” he says.Currently, the 27-building community is 80% occupied and monthly rents range from $500 to $610. “The new owner will be able to up rents $25 per unit to $50 per unit right away,” Sherman says. Orange Grove is situated on 18.5 acres and consists of 132 one-bedroom units of 570 sf and 264 two-bedroom units ranging from 680 sf to 771 sf. S.F.B. Terrace Park Apartments obtained an $11.4 million loan from Los Angeles-based Intervest Mortgage. The loan has an earn-out structure, according to Sherman.

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