Jacksonville-based apartment management and investment firm Michaelson Real Estate Groupspent $63.7 million on Thursday to buy 628 more units in Winter Park and Baldwin Park, bringing the company's total to 4,800-plus apartments in Greater Orlando. CEO Mike Moses isn't letting his foot off the gas, with four more local properties under contract.
"It's location, location, location for us right now in continuously growing Orlando. Winter Park is one of the best locations in your area, we like the Triple-A schools, proximity to everything, the traffic count off S.R. 436. Last year we bought nine properties in Orlando, and two were in Winter Park," Moses told GrowthSpotter on Friday.
The company paid $17.5 million for the 192-unit Affinity at Winter Park Apartments ($91,145 per unit). Located at 600 N. Semoran Blvd., the property was built in 1969, and has an average unit size of 1,074 square feet with average rent of $968. It's now Michaelson's fourth property in Winter Park.
Michaelson's second acquisition Thursday was the 436-unit District on Baldwin Park for $46.2 million ($105,963 per unit).
Located at 5590 Baldwin Park St., the property was built in 1973, with an average unit of 786 square feet and average rent of $1,134. Whitaker and Warren also represented the seller, Nashville-based Orlando Multifamily Partners, LLC, affiliate of Covenant Capital Group, which previously paid $24.5 million in March 2013.
While Covenant sold that property as part of a fund it was closing out, the company is an active buyer in Orlando, recently closing on the Columns at Winter Springs and Country Place Apartments off Bumby Avenue in Downtown Orlando, Whitaker said.
Michaelson sourced mortgages for both acquisitions from Fannie Mae, via Berkadia, with 80 percent leverage achieved on both and a 4.1 percent interest rate locked in, Moses said.
"Most of these deals we're doing are locking in 10 to 12 years of debt with Fannie Mae and getting five to six years of interest-only on them, which allows us a better cash return," he said. "We're looking to achieve an 8 percent cash-on-cash return."
Very little renovation work will be needed on either property, Moses said, with both previous owners investing recently in exterior and interior rehab. Affinity at Winter Park has 41 units still to be upgraded.
"We're just going to stabilize the property and do some landscape enhancements," Moses said.
Greater Orlando's continued job and population growth has made it a priority investment market for Michaelson, which targets Class B and C properties with value-add potential, or where its management can reduce loss of lease and focus on utility reimbursements.
"We have another four properties under contract now in the (Greater Orlando) area," Moses said. "Cole and his team at Berkadia were instrumental to closing these last two, and are a great group of people to work with."