That's the situation Dallas-based Gulfstream Capital Partners faced in its recent $23-million acquisition of the 440-unit Falcon Lake Apartments at 11701 Palm Lake Road in Jacksonville. The closing price, around $52,000 per unit, is roughly half of the $45 million that Falcon Lake's developer, Boca Raton-based Falcone Group, put in when the 435,700-square-foot complex opened in October 2008.
JPMorgan and Key Bank held a $35-million mortgage on the property, which Gulfstream's principals had pursued previously in 2009 and was secured by another group. It became available later when that deal fell through, but this time it required a year-end closing, according to Frank Howard, managing principal of the real estate investment management firm.
"You just have to be aggressive and keep looking and calling to find opportunities such as this one," Howard tells GlobeSt.com. "It wasn't easy and there were a lot of hurdles."
Once Howard and Matt Vruggink, Gulfstream's head of acquisitions, were finally able to get the lender to agree to pricing, it was able to roll toward a 13-day closing that took through the holidays to Dec. 31. Gulfstream partnered with San Antonio, TX-based Lynd Co. on Falcon Lake operations.
Despite being a class A complex, Falcon Lake was only half-occupied prior to the sale because of insufficient marketing and competition from nearby apartments in Jacksonville, Howard says. Gulfstream adjusted asking rents downward slightly, starting around $700 per month, and the complex has signed 14 new leases since the start of the year, he says. The new owner is also in the process of rebranding the asset as Eastport Apartments, he adds.
Gulfstream, which focuses on value-add and opportunistic acquisitions of multifamily properties in major metropolitan areas, aims to invest up to $500 million through a combination of private investor dollars and secured debt. It intends to place 10-year Freddie Mac debt on Falcon Lake upon stabilization in the next 12-18 months and aims to sell it over the next three to five years depending on the market, according to Howard.
Falcone Group also sold its 379-unit Falcon Square property near Orlando last month to Tampa-based DeBartolo Development LLC. The sale price on that asset was $28 million.
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