PHOENIX-BH Properties has closed on its first "fractured condo" transaction, recently acquiring 214 units from the 348-unit Avalon Hills apartments. The California buyer will fix up the units, which were acquired in two separate transactions, then rent them out.
The seller for the bulk of the units – 205 units, to be specific – was Michael Carmel, the receiver for LaSalle Residential Holding Corp. LaSalle had acquired the property at 3535 W. Tierra Buena Lane in September 2005. Though LaSalle Residential had been able to sell many of the units, the financial meltdown drove the property into bankruptcy, with a receiver in place.
According to BH Properties' executive vice president Steve Jaffe, these transactions represented somewhat of a departure from the company's usual M.O. "We've been buying entire apartment complexes in the Phoenix region; and this particular transaction was a fairly logical extension of that," he explains.
He tells GlobeSt.com that, because BH Properties likes the value-add plays, the assets examined need to be at a decent price point. However, "it's been a fairly frothy market with multifamily over the last year," Jaffe observes. "Trying to find opportunities that fit for us is a little more challenging."
As such, BH Properties had been examining another fractured condo opportunity, but took a pass on that one. Then Avalon Hills came around, shown to the buyer by Colliers International's Bill Hahn.
"We wanted to do this deal," Jaffe says. "The good news is that we have a good footprint in Phoenix, meaning we can manage these as apartments."
Even has BH Properties begins upgrades on Avalon Hills, the investor is seeking out more. "We really like what's happening in the Phoenix market," Jaffe says. "Our investments have done very well for us." He adds that the company is looking at office and industrial investments, as well as multifamily buys.
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