Time to Buy - Apartments

Time to Buy - Apartments

A Tampa couple sees a solid future in apartments

and has bought three complexes in three months.

commercial real estate by Jay Brady | Contributing Writer

If you're an experienced Gulf Coast apartment investor and operator with cash, now seems to be the time to buy, and you don't need an ad campaign to tell you that.

Bouncing markets, falling real estate and nearly frozen credit markets seem to be no obstacle for Tampa-based Hachem Investments and SLH Property Management.

The husband and wife real estate investment and property management team of Sam and Laurice Hachem (pronounced Hashem) have purchased three apartment complexes the last few months in the Tampa Bay area for $36.1 million. The couple purchased 725 apartment units in Tampa and Clearwater, and are looking into purchasing up to another 500 units, perhaps by the end of the year.

"My husband has been in the market for a number of years. We buy when it's down and sell when it's up," Laurice says. "We just waited and waited. We didn't want to pay an exaggerated retail price so we waited and waited and it paid off. The three properties are very well located. We are very comfortable and happy with the investments we have made in all three properties."

It's a good thing, too, if you believe in the old adage that you make money when you buy, not when you sell. The couple's activities may also signal a rental market response to the economy and the demands of ex-homeowners seeking lower priced multi-family housing.

Indeed, the Wall Street Journal, in an Oct. 6 article, contrasted rising mall vacancies with the apartment market, saying it "remained one of the most healthy real estate markets in the third quarter, benefiting from the struggling home-sales market. Many would-be buyers, unable to get mortgages or worried about the darkening economy, are renting apartments instead."

Having come out of an admittedly premature retirement in December 2005, the couple began its trio of purchases in mid-June with the two three-story buildings of the Lenox Place Apartments followed by Royal Breeze in July and then the Captiva Club in September. LaSalle Bank, N.A. provided financing for the Captiva Club purchase.

The most recent, and also largest purchase in terms of dollars and units, is the 357-unit Captiva Club Apartments in the Town 'n Country area of northwest Tampa from AIMCO Captiva Club, JV, LLC for $19.5 million.

The cost per unit ranged from $29,762 for the working class and retiree-oriented Lenox Place Apartments in the Sulphur Springs area near USF in Tampa to $58,125 per unit for the Royal Breeze Apartments on U.S. 19 North in Clearwater. Royal Breeze is geared more for working class residents. The more upscale Captiva Club units averaged just over $54,600 per unit. With a "hands-on" approach, they are currently focusing much of their time sprucing up Captiva Club.

Denver-based AIMCO, aka Apartment Investment and Management Company, also recently sold Legends Oaks in Central Tampa for $23 million. AIMCO (NYSE: AIV) has sold a small percentage of its holdings this year. AIMCO, a real estate investment trust, is the largest owner and operator of apartment communities in the U.S. with more than 202,000 units in 1,163 communities.

Plans and clouds

Laurice Hachem explained the couple's strategy: "We realize that with brokers and sellers, they were in denial. We realized things were going down. We held fast and waited and waited and the offers we were making weren't accepted. Sure enough, people came back to us. One property was reduced 20-some percent."

On that one, the Hachems offered a price less than their original offer that was rejected. It is clearly a buyer's market.

But there are worries on the horizon, also.

One of those is that a prime demographic of renters are recent college graduates. But with the slowing economy and belt-tightening among businesses, entry level jobs for college grads are scarce. That, along with people who have lost their jobs, is forcing some would-be apartment renters to move in with family and friends.

Further, if unemployment continues to rise, it will be difficult for apartment operators to push up rental rates.

The unemployment rate in the Tampa-St. Petersburg-Clearwater Metropolitan Statistical Area rose to 6.9% in August from 6.7% in July, well-above the 4.5% rate in August 2007, and slightly above the state average of 6.8% in August of this year.

When asked if they plan to fix-up and sell or hold, Laurice replied, "We've learned our lesson. We plan to fix-up and hold. The best and safest thing is to hold and maintain and keep them. We've sold everything before and were very unhappy."

Their vision is not for quick flips or capital gains. "We're in it for income."

In the midst of their purchases, Sam, in his early 70s and Laurice, in her mid-50s, also somehow found enough time to recently renew their wedding vows - looking back while looking forward.

Seeing what's coming

"We've been shown some others and have some interest in others, but don't think we are going to buy more than 500 more units," she says.

She says they are in the market still looking at a foreclosure in the Tampa Bay area and other properties in Manatee County. "I think we will cap out at 1,200-1,300 units," she says.

Asked if the credit crunch could affect any plans for more purchases, Laurice was quick to say: "No. We have still been fortunate to be able to acquire these, but it's a horrible situation right now, but don't anticipate it to affect us. If we do this last one it will be by the end of the year and we have financing lined up."

They hope to continue using multiple commercial bank sources for financing.

One area Hachem Investments will not be venturing into are so-called "fractured properties," apartment properties that were being converted to condominiums a couple years ago and now units that could not be sold are attempting to be leased.

"It affects the market a little, which is why we saw the market getting softer and vacancies going up a little bit more," she says.

The couple moved to Florida from California in the 1980s, chased away by that state's earthquakes. Although Florida still has hurricanes, she explains they are better than earthquakes, because at least you can see them coming.

It appears they have seen the apartment market coming to them. Their next moves may tell observers something about where it's headed from here.

Lebanese

Connection

Sam and Laurice Hachem are both of Lebanese descent. The Hachems have been involved in the American Lebanese Chamber of Commerce and participated in a trip to Lebanon in 2006 as part of the Lebanese American Renaissance Partnership, an initiative to rebuild Lebanon.

Formerly Laurice A. Malouf, she is a cousin of Walid Maalouf, the founder and former national Vice President of the National Alliance of Lebanese Americans and was the national executive director of the American Lebanese League.

Maalouf spearheaded the 2006 Lebanese American Renaissance Partnership to Lebanon. (See www.walidmaalouf.com for more information or to see photos of the Hachems with Maalouf.)

REVIEW SUMMARY

Company. Hachem Investments

Industry. Multi-family residential.

Key. Buy low, but invest for the long haul.