The client of SVN Bluestone & Hockley advisor Cliff Hockley only had a limited amount of time to identify the up-leg of a 1031 exchange and close on both deals.
After an extensive search, Cottonwood Apartments, located in Redmond, Oregon was identified as the up-leg of the exchange. The apartment complex which was originally listed as a standard market apartment property, however, it soon became clear through the due diligence process that the property was actually permitted as a senior apartment property. Attempts by an attorney and title company to change the property to a standard market rate project failed.
Another challenge was that the rents were low and there were some tenant expenses that the landlord was paying for. Financing was difficult to obtain because this property was not located in a major metro area. This deal took place in an auction environment bidding against other offers so the offer needed to be as interesting as possible to the seller.
Cliff Hockley worked very closely with the listing agent to create a deal that would work for both the buyer and the seller. In order to qualify for financing, the landlord needed to raise the rents and pass all of the cable TV billings through to the tenants (in order to reduce expenses.) In addition, the full time onsite manager needed to be cut to part time. The seller also agreed to pay for a new paint job, replacement of failing GFCIs and smoke/carbon monoxide detectors that had aged out. To facilitate the process, the financing was applied for before the inspection was completed and the deal closed within a week of the first leg of the 1031 exchange.