During the financial downturn, Price Edwards & Company was involved in excess of twenty receiverships consisting of thousands of multifamily units, including the receivership of Golden Oaks Apartments.
Golden Oaks is a 126 unit garden style apartment community built in 1968. The defaulted owner purchased the property in 1999 for $1,650,000 and operated the property in house as a market rate community. The last five years leading up to the foreclosure, the partnership that owned Golden Oaks had some financial problems and were forced into bankruptcy to prevent the lender from pursuing a foreclosure action. The bankruptcy allowed the partnership to restructure some debts and renegotiate the mortgage ultimately buying more time, however not completely bringing the property back to a profitable state. In mid-2012, the lender asked the court to appoint Ford Price Managing Partner of Price Edwards & Company as the receiver, who in turn hired Price Edwards & Company to manage the property throughout the process. The entire foreclosure process was relatively short as the owner turned the property over to the lender via a deed-in-lieu-of-foreclosure.
Upon receiving title, the lender hired Price Edwards & Company to market the property for sale. At that time the property was 60% occupied and being offered for sale to the highest bidder. As with most distressed properties during this time period, no asking price was designated, and the lender decided to allow the market to determine the price. In less than one month PEC procured eight strong bids and ultimately negotiated the transaction at a price of $1,650,000 ($13,095/unit) when the average price for 2012 was less than $8,500 per unit on distressed properties.
The buyer contracted with Price Edwards & Company’s multifamily management division to continue to manage the property after closing and formed a close working relationship to put in motion an aggressive renovation and repositioning plan. From the beginning, the buyer budgeted for full roof replacement, complete renovation of approximately a dozen down units damaged by fire, upgrade all units to increase market rents, and various other exterior and cosmetic improvements. Historically, Golden Oaks had the lowest rents in the immediate area, and the goal was to increase it to become the leading property commanding the highest rents. The renovation plan was initiated quickly, along with a new name for the community, Lamplight on 34th Street.
Although the project is not 100% complete, Lamplight on 34th Street is now 84% leased, and the income has increased 78% since being purchased. The remaining down units are currently being renovated and are expected to be completed by summer. The projected gross revenue is now $700,000 reflecting an astounding $150 per unit increase in rents.
Based on projected net operating income, the value of Lamplight on 34th Street is expected to approximate $4 million, which is right in line with the year-to-date 2014 average of $32,000 per unit for similar aged assets.
This type of project shows how adding a full service commercial real estate company to your team can create value in hidden opportunities by leveraging our resources and capabilities. For the last 25 years, Price Edwards & Company has developed targeted strategies for clients owning retail, office, multifamily and industrial properties in order to protect and enhance their real estate investments. Just like at Lamplight on 34th Street, Price Edwards & Company was able to analyze the asset, develop a strategy based on the desired outcome, implement the agreed plan, and regularly track its performance, ultimately yielding superior investment results.
