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THE GALLERY APARTMENTS

56

units

$225,179

price per unit

5.14%

cap rate

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CHALLENGE.

The NAI Wisinski Great Lakes Multifamily Team was retained exclusively to market an exceptional, 56-unit luxury high-rise apartment building in the downtown district of Grand Rapids, MI.  The property was part of a mixed-use condominium comprised of a city-owned parking structure, a vacant space owned by Ferris State University that had formerly been used as an independent film studio and a fine arts facility, plus the “Class A” apartment community which occupied the top seven stories of the building.  None of the condominium owners had greater than 50 percent of the voting rights.  The voting structure meant that the multifamily asset lacked voting control over the maintenance and management of shared building elements.  Therefore, the number of permanent lenders who were willing to provide financing was greatly reduced.  This appeared to include agency lenders, which typically provide the best leverage and other loan terms for market-rate housing.

SOLUTION.

NAI aggressively marketed the asset in order to identify the most motivated buyers.  Multiple offers were generated.  Buyer competition encouraged the most motivated and interested parties to submit very attractive offers.  Strong borrowers were able to overcome the issues of voting control, as a significant balance sheet helped mitigate the perceived risk of the asset.

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RESULTS.

Ultimately, robust buyer motivation overcame the issue of accessing the best debt source to support a great price for the asset.  A well-capitalized buyer used proceeds from a looming 1031 exchange to purchase the property.  The buyer was highly motivated to place funds, but also had the ability to place attractive debt on the asset due to personal balance sheet strength.  These factors combined to allow the seller to achieve top tier pricing for an asset that was slightly encumbered.  The buyer was able to complete a time sensitive 1031 exchange and acquire a high quality real estate asset.  The buyer and the seller were both pleased with the result.

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