April 30th, 2015 was a good day for Desh Gupta. Desh closed the purchase of a 64 unit apartment complex in North Phoenix at 16802 N 26th Place called Northview Estates. At the $3,072,000 purchase price this represents a $48,000 per unit cost. Scott Trevey, CCIM with the Kasten Long Commercial Group, represented the Seller in the transaction (16802 N 26th Street #101-#116, LLCs, John R. Becker manager) and facilitated the all-cash deal.
While this could be considered top dollar for a property in this neighborhood, the purchase represented an opportunity with significant upside. Granted, the Seller did all the heavy lifting with significant capital improvements to the property during the prior 3 years ownership: they installed all new double-pane hi-efficiency vinyl windows, all new roofs, tiled floors in 100% of all of the units, all new electrical service panels, new ACs and cabinets. This sale was for a turn-key property at 100% occupancy. Plus, each unit has its own washer-dryer hook-up closet for stackable units. The property boasts 85% 2 bed X 2 bath rental units (which is a demographic fit for that ‘family’ neighborhood) but the units are contained within 16 condo-mapped 4-plex buildings This condition provides significant upside in this area for these large rental units.
Here’s an example of a buyer looking out-of-the box and seeing a way to reposition an asset. For the area and condition, the property sold for top-dollar. The buyer understood the area and realized two things that would add significant value. First, the units could all have a washer/dryer installed and thereby increase the rent by at least $30/month. Second, since each of the 4-plexes was already condo mapped, the owner might be able to resell the 16 4-plexes individually – making a significant return on the monies invested.
The property took an extended closing period as the new buyer needed to confirm that the City would allow each of the 4-plexes to have separate metering. Once this was confirmed – the sale was completed. Meanwhile, this extra clean property with upside in rents will produce solid revenues for the new owner, which should continue to increase on into the future as rents continue to climb.