155-Unit Unique Value-Add Investment
5008 East Thomas Road | PHOENIX, AZ
SALES PRICE: $10,600,000
SELLER: Wyndham Partners, LLC
BUYER: Revival on Thomas, L.P.
PRICE PER UNIT: $68,387
PRICE PER SQ. FT.: $110.88
YEAR BUILT: 1979
LOT SIZE SQ. FT.: 245,243
NET RENTABLE SQ. FT.: 95,602
FINANCING: First Bank
FIRST LOAN AMOUNT: $7,950,000
CLOSE OF ESCROW: 10/25/2016
SELLER PROFILE | TRANSACTION GOALS
This Selling Partnership consisted of multiple investors who purchased this property at the apex of the market in 2006. At the time it appeared that the price of $56,000 per unit was conservative, but the property required extensive upgrades and the eight year recession was approaching. Fortunately they had control of the management team and were able to refinance in 2008, but failed to turn a profit until 2015. Although they hoped to sell and take advantage of our high sales velocity, the building’s occupancy was high but rents were considerably lower than the surrounding market. With our expansive rent survey, we were able to show the potential level of income that the current project could sustain. We were then able to convince the partners to take six units and do a significant model upgrade so that a potential buyer could witness how a “new” unit would look and if it could be rented. Needless to say, two units rented for $250 higher prior to going into escrow.
BUYER PROFILE| TRANSACTION GOALS
This local rehab specialist was very active in the market- buying and selling apartment product in every part of the Valley. He was very savvy and his partners had lofty expectations of investment returns and disposition profits. We showed him how his goals could be met if a specific budget was enacted, and how his new management could capture better tenants at new rent levels. The plan was to spend approximately $9,000 per unit in exterior capital projects and $6,000 per unit in interior improvements including en-suite washers and dryers. Ultimately as the “Arcadia Lite” neighborhood continued to improve, the Thomas Road corridor would presumably absorb new renters who were priced out of the surrounding Scottsdale/Camelback Road submarket, and who were willing to pay over $1.40 rents for new “B” product. Because of his clear plan to execute, the buyer made a non-contingent offer, beating out several other parties who also saw the viability of this potential turnaround project.
PROCESS AND RESULTS
This was the second project sold on behalf of this partnership. Once again, we clearly showed the ability to control the marketing process by differentiating our promotional collateral, taking advantage of aggressive market assumptions and allowing high buyer demand to quickly determine pricing levels. In this case, we invented the new rent levels by forcing the partnership to invest in 6 “new” units. By closing we had received over 15 offers, but had 3 offers who were actively engaged when the seller made a final decision. Because of the low cap rate, we did not formally price the property but had to distinctively communicate with all interested parties until a choice was finalized. At the seller’s request, all contracts were drafted on M&M forms and predictable third party vendors were used so costs could be kept to a minimum. As a result a very smooth and quick closing was achieved.