Notorious Sanford Capital Sells 2 More D.C. Properties, Plans To Unload Entire Portfolio
Controversial D.C. landlord Sanford Capital, which has faced investigations and lawsuits this year over the conditions of its properties, has just sold two apartment complexes in Wards 7 and 8 and plans to unload its entire D.C. portfolio.
Sanford sold the 45-unit G Street Apartments at 4951 G St. SE for $4.5M to Dr. Yusuf Mosuro. The Marshall Heights property, which was days away from foreclosure at the time of the sale, has been one of Sanford's most controversial.
Investigations by Washington City Paper, including one titled "Life is Hell for Tenants of Giant D.C. Slumlord Sanford Capital," which kicked off a series of lawsuits against the landlord, have shined a light on the decrepit conditions of the G Street Apartments. The reports revealed apartments that smelled like mold, which tenants believed were causing sickness, and feces-filled bathtubs resulting from overflowing sewage.
The property is roughly 60% vacant, but those units have been occupied by vagrants and squatters, Mosuro said, which has brought an increase in crime to the community. He said the previous landlord left deferred maintenance on much of the property. Sanford founder Carter Nowell declined to comment.
To deter crime, Mosuro plans to remove the squatters and install security cameras that will connect directly to the D.C. Police Department. He plans to invest at least $1M in upgrades to the property. He aims to bring all the units up to code and improve the common areas, parking lot and landscaping. He said he has met with the tenants and they are excited about the change in ownership.
"They are very happy to see change, to see somebody that believes in them and sees them as a customer, not just ordinary tenants who have no value," Mosuro said.
YMOS Inc., Mosuro's company, executed the deal through a 1031 exchange, allowing him to defer the taxes from his recent sale of a property at 2833 Georgia Ave. NW.
Marcus & Millichap's Cameron Webb, a 26-year-old rising star in the industry who was just promoted to vice president and has closed over $125M in deals, represented Sanford in the the G Street apartments sale and Marcus & Millichap Associate Jesse Mates helped procure the buyer. Both brokers also arranged the Georgia Avenue deal. Webb said there was a lot of pressure to close the deal, given the looming foreclosure deadline.
"We got notice it was going to go into foreclosure on Dec. 7," Webb said. "We barely made it. We had to get over a lot of hurdles with [the Tenant Opportunity to Purchase Act]. The tenants did like the buyer, and that made a lot of the difference."
The G Street property has significant upside, Mosuro said, because most of the units contain two, three or four bedrooms, a rarity in D.C. He said he aims to bring the community to full occupancy within nine months.
"We're used to getting into a multifamily building and turning it around; that has been our specialty," Mosuro said. "If we're able to execute all those [improvements] within a year, this place is going to be very different than what it is now."
The second property Sanford sold is the 156-unit Martin's View Apartments at 205 Elmira St. SW. D.C.-based Stoladi Property Group acquired the community for $15.5M.
The apartment complex, sitting near the intersection of Martin Luther King Jr. Avenue SW and South Capitol Street, is in one of the only areas east of the river that is part of Southwest D.C. It was mentioned in an investigation of Sanford Capital by the Washington Post, in which a resident complained about faulty hot water and leaking ceilings.
But Marcus & Millichap Senior Vice President Stacey Milam, who represented Sanford in the deal, said the landlord recently renovated the units and the property was in good condition. Milam said he has worked with Sanford on many of the company's deals since its 2005 founding, and he does not believe Nowell has had bad intentions.
"Most people don't plan to be slumlords," Milam said. "Different circumstances occur in the marketplace or municipalities make it difficult ... No one comes into a building wanting to have deferred maintenance. The issue is rent control is tough. You're heavily leveraged and trying to fix it up."
Sanford this year faced two lawsuits from D.C. Attorney General Karl Racine over its failure to fix problems at its Terrance Manor apartments, ultimately reaching a $325K settlement. The landlord also faced a housing discrimination lawsuit filed by the Equal Rights Center in June over its Belmont Crossing Apartments. It sold two of its Northwest D.C. properties in October for a combined $12.4M.
Many of Sanford's partnerships are dissolving, Milam said, due to a combination of the negative publicity and the timing of the deals. Because of this, he said Sanford has chosen to sell the rest of its D.C. portfolio.
"The investors have been in these deals long enough," Milam said. "I'm getting the feeling everyone wants to move on."
He could not say how many units the landlord has remaining in its portfolio. The company had 16 properties at the time of WCP's February investigation. Milam said Sanford might execute 1031 exchanges to spin these sales into future acquisitions, likely of better-quality apartments or retail properties.
The deals also represent a new optimism on behalf of investors for properties east of the Anacostia River, Milam said, a market he has been working in since the late 1990s.
"There is a very opportunistic energy going on in the market right now, even institutions are interested in deals that are cost effective," Milam said. "It's like going over to Harlem before it was progressing. The only difference is Harlem is further from the nicer markets than Southeast because D.C. is so tiny. It's a natural progression."
Mosuro said he expects rent prices to soon rise in Southeast D.C. like they have in many other areas of the city, making it more attractive for investors like himself.
"The fact that Northwest and Southwest are all saturated, people have no choice but to move to other parts of D.C.," Mosuro said. "Gentrification is coming to Southeast."