Ormond Beach-based Lohman Apartments paid $8.08 million in early August for 190 condominium units in Northwest Orlando. Owners now have more under contract and up to $45 million from recent dispositions they're actively trying to place in new assets, a principal with the company told GrowthSpotter.
Located at 4500 Silver Star Road a few blocks east of Evans High School, the newly acquired units make up the bulk of Los Robles Condominiums, a 200-unit complex which covers 10 acres. The property will be rebranded as Eagle Landing of Orlando.
The company recently sold six apartment complexes totaling 1,250 apartments in Daytona Beach and Orlando to a Miami investor for $63 million. It then reinvested $16.6 million of that into buying three complexes this month (457 units overall) in Daytona Beach, Orlando and Jacksonville.
Lohman Apartments now owns nine complexes totaling 1,593 units across Daytona Beach, Orlando and Jacksonville. Just under 400 of those units are in Orlando, a focal point of the company's growth.
"We were on the phone yesterday trying to target the Orlando market, and have offers out on three deals right now," said Ty Lohman, principal with the company alongside his father Lowell and mother Nancy.
"Our acquisition markets are Orlando, Daytona and Jacksonville. We found by clustering around Ormond Beach our staff can get to any of our locations within an hour drive," he continued. "But if we had to pick a favorite market we'd say it is Orlando, we think it has the best future among those three."
In 2012, the family sold Lohman Funeral Homes' 14 funeral homes and cemeteries to Pennsylvania-based StoneMor Partners L.P, and began investing in apartment properties. It was the largest family-owned chain of funeral homes and cemeteries in Florida at the time of the sale.
The company is targeting affordable housing assets (B and C class), because "you can't build B and C class any more, so it just creates a higher demand for our product over time," Lohman said. The company targets value-add opportunities, particularly under-leased properties where their marketing experience can apply.
"We try to find an 8 Cap (rate) or higher, but if we find a 6 Cap that is only 80 percent occupied with renovation needs, that doesn't scare us," Lohman said.
At Los Robles, the fractured condo property has 10 remaining units owned by individuals that Lohman Apartments will try to acquire in the future, in order to then fully convert the property to apartment status.
The company's affiliate Eagle Property Management has taken over the property, where they'll invest up to $500,000 more in the coming year in capital improvements like new fences, patio furniture, irrigation system repairs, a trash compactor and interior renovations of five units. On-site managers will select local contractors for that work.
Looking forward, the company isn't on a deadline to reinvest much of the remaining $46.4 million from recent sales, but it is in acquisition mode, Ty Lohman said.
"It's getting harder to find quality deals out there," he said. "We're estimating that the capital gains tax will increase following the (presidential) election. That could cause some asset holders to put new properties up for sale (before 2015 ends)."
Ty and his father Lowell are betting that Hillary Clinton wins the presidency, and her party raises the capital gains tax from its current 23.8 percent (for assets held more than a year) to 28 percent, or higher.
"We had planned to do a 1031 exchange on half (of our asset sales value), but if the Democrats win we think one of the first things they'll do is raise the capital gains taxes," Lowell Lohman said. "So we discussed this in detail, and if we did a 1031 and delayed the taxes we'd just pay more later. So we'll bite the bullet now and pay at 23 percent. That was a heavy decision."
Lohman Apartments' buyer affiliate LLC sourced a $6.1 million Fannie Mae mortgage for the acquisition via Arbor Realty Trust out of New York.
Michael Donaldson of Marcus & Millichap represented the buyer on the Los Robles condo acquisitions.