FORT MEYERS, FL-In a rare Section 42 sale, Pacifica Cos. snapped up Edisto Lake Apartments. The distressed asset fetched $7 million, or $18,617 a unit. Jonathan Richards and Thomas Fischer of CBRE brokered the transaction on behalf of the seller.

Built in 1996 under the Section 42 tax credit program, Edisto Lake Apartments offers 376 units. Eighty percent of the units are mandated for households with income equal to or less than 60% of area median income. The remaining 20% of the units are reserved for households whose income is equal to or less than 40% of the area median.

“Typically, if these Section 42 properties aren’t managed well or if there is a lot of deferred maintenance they go into what I call the death spiral and they start losing tenants,” Richards tells GlobeSt.com. “That’s what happened here. Occupancy is only about 83%.”

Edisto Lake Apartments features 23 two- and three-story buildings. The property sits on more than 90 acres of land surrounding a 60-acre lake. Although the location is prime in South Fort Meyers, the target demographic for the complex—construction, retail and hospitality workers—has struggled in a down economy and rents and vacancy suffered.

Richards says the property was very close to going into foreclosure. Technically, he explains, the deal was a short sale as the second mortgage was in default. Many of the units are not rentable, but Pacifica plans to invest about $6 million into the property.

“Edisto Lake is a great opportunity for Pacifica,” Richards says. “This is the type of deals they do. We’ve seen a lot of of class A and B apartments trades at much higher pricing and much lower cap rates, but Pacifica looks for opportunistic situations. The buyer acquired this property with a good basis in a classic turnaround situation. Edisto Lake has the potential to be one of the nicest affordable rental communities in South Ft. Meyers.”