Investor Buys Stalled Project

Investor Buys Stalled Project PHOENIX, AZ - An apartment and condominium investor with about $1 billion in assets has purchased the developer-owned portion of a stalled upscale condo project in Phoenix and says it is anxious to snap up similar properties at the right price. The sale is a positive sign in a market where no condo projects of comparable size have sold for months, local analysts said. But the investment firm's successful offer of about $70,000 per unit may shock individual condo owners who paid as much as five times that amount.

The sale of Citi on Camelback, a 360-unit condo and apartment complex at 909 E. Camelback Road, was announced Monday by participating commercial real-estate brokerage Integrated Commercial Capital of Scottsdale.

The buyer, a partnership called Orion Camelback LLC led by Chicago-based Orion Residential LLC, paid $12.5 million for the project's 178 unsold condominiums, an average of $70,000 per unit.

The other 182 condos are individually owned by investors and occupants, some of whom paid more than $300,000 for a unit as recently as mid-2008, according to Maricopa County Assessor's Office records.

Despite steep devaluation and scant individual condo sales in recent months, local real-estate analysts and brokers said buying all or part of a deeply discounted condo project can still be a good deal because of the likelihood of generating recurring revenue from renters.

"The reason it works is because it's also an apartment player," ICC commercial broker Rue Bax said.

Orion Camelback principal Scott Knauer said the company is back to actively seeking new acquisitions in the Phoenix area after a lengthy timeout when market supply and optimism surged out of control.

"We stopped buying aggressively about two years ago, when we felt the market had become overheated and overpriced," Knauer said.

Now that prices on some properties have returned from orbit, Knauer said his company believes it's the perfect time to start buying again.

That doesn't mean Orion expects to sell off the project's remaining units in the near future, he added. The investment firm's immediate plan is to continue leasing them as apartments, just as previous owner RF Sunvest Development had done.

"We're happy to sell a condo, but we're also happy to own them for the next three to five years," Knauer said.

The only thing holding back Orion from buying up more condo projects, he added, is that some current owners have not yet accepted the extent to which their buildings have lost value.

Developers of multifamily properties have struggled in the past two years to find interested buyers for either individual condo units or entire condo projects, numerous local brokers and analysts have said.

Because so few apartment and condo projects have been sold, it is difficult to assess what such projects are truly worth in the current market.

Still, the price Orion paid is so low that the purchase makes good sense, said commercial real-estate analyst Bob Kammrath of Phoenix-based Kammrath and Associates. "They'll come out fine," Kammrath said. "They might have to hang on to them for several years."

The sale of Citi on Camelback will help to set a baseline value for future sales of stalled condo projects, he said. Individual condo owners paid considerably higher prices. County records for one unit, purchased in June 2006, show a sale price of $356,000. Even the most recent sales were for at least double what Orion paid, such as a foreclosed unit that went for $146,000 in October. "If you were really trying to pinpoint the losers in this deal, it's the people who bought the condos," Kammrath said.

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