Originally entitled and built as condominiums, a growing inventory of unsold units in the market and a steady decline in average sale price had forced the previous developer and construction lender into a sale of the distressed asset by early 2009.
In an off-market transaction, the construction lender approached MPF as a possible acquirer of the asset, in large part due to an existing relationship with the construction lender and MPF’s impeccable track record of performance on loans and reliability in execution of acquisitions.
In fact, our track record of performance has become an important part of our acquisition strategy, as a growing share of our acquisitions are transactions that were brought to us after having previously fallen out of escrow; distressed transactions where timeliness and reliability of execution had become paramount.
In addition to a weak condominium market, the project also faced lingering environmental issues which had been preventing the previous developer from obtaining final signoff from the regulatory agency. Having extensive experience in working with the regulatory agency and close relationships with agency officials, MPF was able to step in and expedite the regulatory review process and obtained the necessary approvals.
MPF acquired the completed project in July 2009 and the building was fully vacant at the time of acquisition. Originally built for approximately $34 million, MPF was able to acquire the newly-completed asset for $14.5 million.
The building is currently capitalized with approximately 40% leverage in the form of a conventional commercial mortgage. With an in-house property management department, MPF intends to lease-up and operate the 75 units as apartments for the term of the investment. Being entitled as condominiums, when the for-sale market recovers MPF will have the flexibility to either sell the individual units as condominiums, market the entire building as a multi-family asset or retain the asset and its stabilized cash flows.