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Cap rates and demand from institutional investors and private equity are so strong that Prime Property Investors only got halfway through its post-acquisition value-add plan on its Deer Valley Luxury Apartment Homes before putting the community back on the market. (Unlike wine, holding on to a property for a long time doesn't necessarily increase its bouquet.)
Michael Zaransky and Barbara Gaffen
Prime Property Investors' Barbara Gaffen (with co-CEO Michael Zaransky) tells us her firm acquired the 224-unit Lake Bluff property on May 23 of last year for $21.9M. The firm has updated the 20-year-old kitchens and bathrooms on 110 units, increased rent rolls by $40k/month, and raised occupancy from 93% to 100%. Prime is renovating 10 to 15 units a month, and those command rent premiums as high as $150 a month, Barbara says.
Reznick (Client) MCHI
Deer Valley Luxury Apartment Homes clubhouse, Lake Bluff
She says recent Class-A apartment sales comps in the area range from $140k to $200k/unit. Deer Valley (that's the clubhouse above) won't be on the higher side of that spectrum, but even a sale on the lower end would yield a substantial return. The firm likes suburban properties in high-employment corridors and would like to buy another in the Naperville/DuPage County area, where it owns the 281-unit Arbors at Brookdale, purchased for $32M in December '09. Arbors has a 10-year Freddie loan while Deer Valley is debt free (deer are historically credit-conscious creatures), another quality that facilitated the quick sale.