Carlos Vaz and Brad Costanzo of Conti & Costanzo LLC, backed by a growing list of various equity backers, have picked up the 208-unit Huntington Apartments at 5700 Boca Raton Blvd. in Fort Worth's struggling Woodhaven section and 143-unit Arbor Terrace at 1029 W. Arkansas Lane in Arlington. As they step up their drive to buy, they say they've bumped up their sweet spot to the $5-million to $10-million range to make it easier to secure financing and attract new equity investors.
They acknowledge to GlobeSt.com that they're "doing it the hard way," but they say it's a thought-out plan based on cost-segregation analyses to wring the most value in the quickest way possible from their acquisitions. "At the end of the day, it's not about cap rates, but the property itself and how much a dollar is going to make us," Vaz says. "We are the ones who have to prove something to theDallas community and it's not the other way around."
[IMGCAP(2)]Vaz, who relocated from Boston, met Costanzo, a cost-segregating consultant with 10 years' experience in Dallas, through his accountant. Their early-on legwork produced investors from both their homeports and California.
Vaz says he worked to raise Huntington Apartments' 64% occupancy to 94.3% during the three months that it was under escrow by "empowering" the leasing team and being on site to show residents that he cared and meant business. He says he delivered 51 breakfast baskets to neighboring businesses as well as police and fire stations. Also, he hired three people to distribute 10,000 flyers promoting the complex, offering one month's free rent on a one-year lease.
Vaz says the $3.1-million deal closed with a bridge loan at 70% leverage, with just $37,000 allotted for some polishing. The seller was Blue Valley Apartments Inc. of West Palm Beach, FL, which took over the 1980s-era complex on 9.5 acres in September 2006. The complex has one- and two-bedroom units, averaging 802 sf, and rents of 64 cents per sf.
Right after they banked the Fort Worth deed, the partners say they assigned their interest in the limited liability company and management rights to asset to an unidentified partner with experience in the Woodhaven submarket so they could focus on Dallas and Arlington deals. Last Friday, they acquired the 92%-leased Arbor Terrace, another cluster of one- and two-bedroom apartments. Units average 850 sf; rents are 72 cents per sf. Arbor Terrace will be overseen by Migneault Property Management Co. of Rockwall, TX.
The partners say they're eyeing about $150,000 of improvements for the 2.5-acre Arbor Terrace, which was bought through Milano Property Co. of El Cerrito, CA. The limited partnership seller had acquired the 1970s-era complex, assessed at $2.08 million, in October 2004. Duke Stone at Churchill Capital Advisors LLC in Dallas arranged financing.
"Because of our size and experience, we can't afford to make mistakes. Our attention to detail has to be two to three times greater than if we had family money backing us," Costanzo stresses. "We're identifying assets that can be written off over a shorter period of time by accelerating depreciation. We can't miss any steps to squeeze profit."
The portfolio-building strategy calls for three to five-year holds. The determining factor will be "what's happening in the neighborhood," Costanzo says. "But, we're not quick flippers."
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