California CRE investors pay $15.5M for affordable apts complex near Orlando
By Mike Salinero
Mar 06, 2017 at 10:45 AM
UPDATED: MARCH 7, 2017 11:36 AM — Rivergate Companies, a South Florida real estate firm, turned a $6 million profit on its recent sale of an Orlando-area apartment complex, and the company is looking for more investments in Central Florida.
An affiliate LLC of the company sold Beacon Hill Apartments for $15.5 million on Feb. 28, according to a deed recorded Thursday in Orange County. The company purchased the 392-unit apartment complex jin mid-2014 for $9.45 million.
"We bought the property for a five- to seven-year hold, but due to the rapid rise in land values we decided to exit on that deal and sell it early," Leon Dixon, director of acquisition and development for Rivergate, told GrowthSpotter on Friday.
"As investors flooded the market, the real estate prices have gone up significantly, so we decided to take a few chips off the table," he said.
Redwood-Kairos Real Estate Partners of Rancho Santa Margarita, Calif., bought the property via affiliate Beacon Hill Orlando Partners LLC. The apartments are on Beacon Hill Loop, near the intersection of Balboa Drive and Dorscher Road.
Redwood-Kairos' managers could not be reached for comment.
Dixon said Rivergate Companies is always on the lookout for new acquisitions, especially in Greater Orlando. Founded by managing principal Jay Massirman, the firm is focused on urban infill self-storage development, multifamily development and investment, and luxury multifamily property management, according to its website.
Rivergate Companies currently owns Bella Vita Place, an apartment complex at 2603 Silkwood Circle, outside Orlando in unincorporated Orange County. Dixon said the company has no immediate plans to sell that development.
"We like Florida in general but we really like Orlando," he said, "and if an opportunity comes along we're definitely going to make a run for it."
Redwood-Kairos invests in both stabilized and value-add properties across several niche strategies within retail, office and multifamily, according to its website. Carl Chang founded the company in 2005 after spending more than 18 years managing his family's investments and real estate holdings.
Chang has directly acquired, developed and managed more than $425 million worth of retail shopping centers, office, multifamily, and multi-tenant light industrial properties throughout the western United States, per his company's website. He has also managed private equity investments in early-stage companies.
Beacon Hills Apartments were built in 1999 with the help of $8.8 million in low-interest, tax-exempt housing revenue bonds issued by the Florida Housing Finance Corp., a public corporation created by the state to finance affordable housing projects.
Beacon Hill Ltd., a Kissimmee company headed by Thomas Tompkins, developed the complex and was the original owner.
In addition to the tax-exempt bonds, Beacon Hill Ltd. received $667,000 in annual housing tax credits for 10 years. The developer sold those credits to investors to help finance construction of the complex, said Cecka Rose Green, communications director for Florida Housing Finance Corp.
To get the bonds and tax credits, Beacon Hill Ltd. had to agree to a land-use restriction agreement (LURA) that guarantees the property will be built and operated in accordance with federal tax law and requirements of the Florida Housing Finance Corp.
The agreement, which expires June 21, 2024, requires that at least 20 percent of the units be set aside for households earning at or below 50 percent of the median income in the area. Rent on those units are well below market rates. The developer can also opt to set aside 40 percent of the units for households earning at or below 60 percent of the area median income.
Though the bonds were redeemed in August 2014, Redwood-Kairos and subsequent owners must maintain the original percentages of below-market rents until the LURA expires, Green said.
Editor's Note: This story was updated Tuesday morning to correct the mention of Bella Vita Place as another Rivergate Companies asset in Orlando. The similarly-named Bella Vita Apartments is owned by Ann Arbor-based McKinley, Inc.
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