The Colliers Sacramento Multifamily Team has closed the $16-million sale of 2850 Cottage Way, a 100-unit apartment property in Sacramento. The property traded at 6.53% cap rate.
The sale posed its share of hurdles along the way. “This was our team’s second time working with this investor on acquiring multifamily property in Sacramento,” according to the team of EVP Aaron Frederick, SVP Matt Sarro and associate George Melski. “With a 1031 exchange underway, he reached out to us to help identify suitable replacement properties. We had already been in discussions with the seller of this particular complex, but just before bringing it to market, one of the family members chose to list it with a different broker.”
Fortunately, the team had a strong relationship with that agent, “which allowed us to move forward collaboratively as he represented the seller while we represented our buyer.”
Early in the process, the team discovered that the seller had been self-managing the property and expensing nearly everything through the profit and loss statement, resulting in an artificially low NOI. “To overcome this, we rebuilt the financials by analyzing rental income and applying expense assumptions based on comparable assets we were familiar with,” they wrote.
Submitting the deal to the lender posed another hurdle. “The bank based its loan proceeds on the seller’s reported financials, significantly reducing the available loan amount. This forced us to request an immediate price reduction to align with the lender’s LTV constraints.” The discovery of deferred maintenance resulted in an additional request for concessions.
“Despite multiple setbacks and moments when the deal nearly fell apart, we were able to navigate each challenge and successfully close the transaction,” the team wrote.
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