Located in Orlando Florida, the Lake Jasmine Apartment complex houses 336 units in total. We feel that this is one of our best opportunities yet. The apartments were previously owned by an investor who refinanced the property with Wells Fargo in 2007 for 17,300,000 with a non recourse loan. Since the loan was non recourse the owner simply stopped making payments and left the property to be dealt with by the bank. A receivership was put into place and the property was mismanaged and quickly fell into disrepair. When receivership are maintaining properties there is usually no incentive to keep the property occupied as was the case with the Lake Jasmine Apartments, which is why when we purchased this project in January of 2011, the occupancy was in the 20% range.
We were able to purchase this property from a company that acquired the note in a bulk note purchase for a total purchase price of 4,600,000 including capital improvements. The property needs renovation on a majority of the units and the common areas will also be improved. Since the project has been so poorly managed we expect that it will take a year to complete renovations and fill the property with tenants. The Orlando Market is thriving with job growth and rental demand. Home ownership rates and all time lows for new multi family units are driving demand which in turn is also driving rents up.
Based on occupancy and rental information in the immediate area we project that we’ll be able to bring the occupancy into the mid 90% range while increasing the NOI on the property by increasing rents to market levels. At an 8% cap rate we expect that we will be able to conservatively bring the project’s value to around 14,000,000. The property was able to service the debt at 17,300,000 for the previous loan and did appraise for that price, however we’re using conservative valuation. We will refinance the project in around 1 year 6 months at 80% LTV and we’ll return or re deploy our investor’s capital. This allows our investors to continue to benefit from the property’s cash flow and equity growth while having received or re invested their capital.