Cook: California hedge fund buys B.R. apartment complex for $1.2 million
A California hedge fund known as Newport Holdings LCC has acquired the 94-unit apartment complex known as Newport Villas—located at 1737 La Annie Drive, just north of Florida Boulevard near Belaire High School—from Black Warrior Holdings LLC, which had only recently acquired it from the bank for nonpayment. The purchase price was $1.2 million, or about $12,765 per apartment. According to CJ Johnson with 3Chix Realty, who brokered the transaction and represented both the buyer and seller, the property was 90% occupied at the time of sale. "Black Warrior had done some rehabilitation prior to the sale. There were some capital outlays that were required like redoing sewer service and fixing the parking, but the units were in fairly good condition," says Johnson. The property was originally listed for $1.8 million, and Johnson says within 30 days of it hitting the market she had a contract in place with the California hedge fund and three back up offers from other interested parties. "There were some management problems prior to Black Warrior acquiring the property. After Black Warrior acquired the complex, they hired Reliant Property Management, who specializes in managing this type asset," Johnson explains. "Reliant got the bookkeeping straight, and when everyone realized what a cash cow it was, we got offers very quickly." If the income projections given to me are correct, the capitalization rate (a rate of return used by Realtors and investors to determine the value of an asset) was around 14%, while most other similar complexes have sold in the 7% range. That makes it an excellent buy for the new owner.
(Appraiser Tom Cook owns Cook Moore and Associates. Reach him at 293-7006 or TCook@cookmoore.com.)
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