The JV partnership initially acquired the asset for $25.85 million in 2014 and sold it for $36 million three years later, according to Passco’s Founder and CEO, Bill Passo. Passco Companies is a privately held Calif.-based real estate company that specializes in the investment, acquisition, development and management of commercial properties throughout the U.S.,
“We recognized that there was a tremendous opportunity to create value and capitalize on the ongoing growth throughout the Phoenix Metro, which is exactly what we did,” says Passo. “When we initially acquired the property, the region was in proven recovery with plenty of runway left for growth in terms of both value and rents. In fact, rents in the Phoenix Metro have increased by 5.6 percent over the past year alone, which is attracting significant investor interest to the region.”
Passo explains that the firm’s ability to recognize the deep value potential of this market early in the recovery cycle allowed them to sell the asset for a premium price, ultimately achieving a 170.5 percent return to investors.
During ownership, the JV partnership implemented a series of interior and exterior improvements to the apartment community including upgrading unit interiors, constructing additional carports and enhancing the property’s exterior and community amenities.
“This was a strong value-add opportunity for our firm,” says Belden Brown, Senior Vice President and National Sales Manager at Passco Companies who also notes that the firm is actively seeking value-add opportunities throughout the U.S. “By renovating and updating the property, we were able to optimize the asset and significantly drive value in a very short period of time.”
Michael Sun, Founder of InSite Properties, LLC adds, “These capital improvements also provided the opportunity to significantly increase rental and ancillary income, as well as position the asset for long-term rent appreciation. This made the property very attractive to investment groups, allowing us to achieve an IRR of approximately 21-22 percent.”
Ovation at Tempe is a very unique apartment community that features one- and two-bedroom apartment units, as well as separate casitas and townhomes situated on approximately 16 acres.
“The property has one of the lowest unit densities in Tempe and is strategically located in close proximity to retail, entertainment, employment hubs, and education centers,” says Mark Forrester, Senior Managing Director at commercial real estate firm Berkadia, which completed the sale on behalf of the JV partnership, in addition to arranging the financing. “Passco and InSite Property Ventures’ value-add strategy truly positioned the asset for long-term growth and filled a void in the local market for high-quality Class A product.”
The property is located at 4502-4505 S. Hardy Drive in the city of Tempe, Arizona. Berkadia’s Phoenix team of Mark Forrester, Senior Managing Director, Ric Holway, Senior Managing Director, and Dan Cheyne, Senior Director, represented the seller, while Berkadia’s Managing Director Jackson Cloak of the firm’s Irvine office arranged the $27 million in financing through Freddie Mac.