MCDONOUGH, GA –Irvine, Calif.-based Passco Companies has scooped up Sundance Creek, a 232-unit, class A townhouse in metropolitan Atlanta. Built in 2004, the property is located at 575 McDonough Parkway in a fast-growth Atlanta suburb. Passo has invested $18 million in the property.
"We looked at this property in 2008 and actually had it under contract with Blackrock Partners," Gary Goodman, senior vice president of Acquisitions for Passco, tells GlobeSt.com. "But the fundamentals of the market and the operations fell off. The occupancy dipped into the 80s and we aborted it."
In a strange turn of events, Sundance Creek went into default. Blackrock lost the property to Des Moines, IA-based Principal Financial. At that point, Passco entered into an agreement with Principal to acquire the note, but Principal decided half way through the process to foreclose, Goodman says. Passco leaped through Freddie Mac lending hurdles to get the loan closed under the proper program and finally took ownership of the property it eyed for two years.
"Even with the additional cost involved in syndicating it, we are buying Sundance Creek for well below replacement costs," Passo says. "These are the only townhome rentals in the market. Current rents are well below what is needed to support new development. There's an opportunity to increase rents for a number of months, if not years, before we are going to see any new development."
Sundance Creek features one- and two-bedroom units, each with its own private entrance. In total, there are 26 landscaped two-story buildings, a clubhouse, resort-style swimming pool and fitness center. Passco plans a series of upgrades to the property, including new flooring and finishes in select units, a premium redesign of the clubhouse interiors, and a dog park.
Bruce Keene, president of Franklin Street's Residential Services, tells GlobeSt.com he's seeing more class A foreclosures beginning to hit the market. The banks focused their attention first on ridding themselves of class C and class D multifamily units, he says, and now banks are pricing class A properties to sell.
"There is a no construction of new product in most markets," Keene says. "When jobs come back, we're going to see an increase in overall income in multifamily. Rents are going to go up, concessions are going to go down. A lot of investors are preparing for that day."
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