New Life to Loft Apartments

[Tom Soranno]

Investment Info:

Other commercial investment investment.

Purchase price: $110,000
Cash invested: $265,000

We purchased this vacant / distressed 6 unit (2 commercial / 4 residential apartment) building in 2015. Remodeling took about 12 months, and required some asbestos containing material abatement. We were fully leased and stabilized by early 2018. We refinanced out the seller and a majority of the private equity at that time with a 30Y perm loan.

What made you interested in investing in this type of deal?

We saw the potential in this under-utilized building. The seller had strategically purchased the building to remove an undesirable landlord from the neighborhood but had no intentions or interest in repairing it. An investment partner brought the deal to us and pitched the pre-lease LOI from a business that was interested in the space. The numbers penciled based on our comps so we took the deal.

How did you finance this deal?

Through a combination of seller financing, personal seed capital, and a second position private debt investor.

How did you add value to the deal?

The building required 100% of the wiring and 90% of the plumbing to be replaced. We upgraded the individual unit service from 60A to 125A, added exterior lighting, and security cameras. We removed the central oil-fueled heater and installed mini-splits in all of the units. We removed walls in the smaller apartments to make them into studios. We removed the failing plaster and sealed the exposed brick, and adding recessed lighting to the 16-FT ceilings to add urban character to the apartments.

What was the outcome?

We have been running > 95% occupancy since 2018.

Lessons learned? Challenges?

The schedule and cost hit from the asbestos abatement was a lesson learned on this one.