Thursday, May 08, 2008

112-Unit Complex Sells in TIF District

Capturing a spot in the heart of a redevelopment corridor, a private local investor has purchased the 112-unit Mill Run Apartments in Oak Cliff. The 95%-leased complex, marketed for $3.2 million, went to the highest of three offers.
The three-building complex takes up four acres at 2732 W. Colorado Blvd. The new owner, who also has properties in upscale Oak Lawn, "saw people were talking about that area and thought it was a good area to buy in," Sam Pettigrew, vice president of Cantrell Cos. in Dallas, tells GlobeSt.com. "He will hold it for awhile and see what happens to the area." He adds the buyer is digging in for a three- to five-year hold.
The deal sweetener is nearby apartment projects already are earmarked as teardowns. In a true value-add play for the present and future, Pettigrew says the new owner is planning to push rents $20 per month across the board since the in-place rates are below market. One-bedroom units are $630 per month; two-bedrooms, $730. Units range from 570 sf to 960 sf in four floor plans.
Harshaw Asset Management Co. of Dallas has owned the 19-year-old complex since 1989. Harshaw owns other multifamily properties, but it's not its core business. "He thought it was a good time sell and focus on the mobile home business," Pettigrew says. He and Cantrell senior associate Elliott Carpenter partnered on the sale.
The tract size and list price work out to $18.37 per sf for the dirt, which has a hard corner positioning and flanked by retail and other multifamily complexes. Recently, Dallas City Council created two new tax increment financing districts in the neighborhood, including Fort Worth Avenue, which is one block away.
About 70 miles northeast, Pettigrew sold another class C complex, the 129-unit Ponderosa Apartments at 2224 Live Oak St. in Commerce. The 60%-leased asset went to Fontaine Management Inc. of Gretna, LA, which two more properties in nearby Greenville and scores of others between Texas and its home base. The seller, banking $1.6 million from the sale, is a private investor from El Paso.
"He did a quick 10-day inspection and went hard with a six-figure earnest money," Pettigrew says. The deal included an adjacent 16,902-sf tract of raw land.
The complex, developed from 1965-76, has a 17-unit density on the 7.5-acre tract. The one-, two- and three-bedroom apartments, ranging from 450 sf to 1,050 sf, are bringing in $460 to $750 per month.
Pettigrew says the buyer, though, is facing deferred maintenance unlike Oak Cliff's buyer. In addition, Ponderosa's new owner is planning a full overhaul, inside and out, according to the broker.