Only nine months from the day we first began our due diligence to the people actually moving in
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Rancho Cucamonga, Calif. (Vocus) July 9, 2010
On a landscape darkened by mountains of toxic assets and the ultimate collapse of the residential real-estate industry, everyone has been eager for signs of a new dawn. Some of the first rays of hope now might be breaking through in this California Inland Empire community about 40 miles east of downtown Los Angeles.
Sycamore Urban Properties, an investment and development company based in Irvine, has rescued a troubled 41-unit townhome development in a successful demonstration of its model for acquisition, stabilization and rapid revival of financially distressed real estate.
It took Sycamore Urban just nine months from the time it acquired the note on the failing development last September to pull it from a bankruptcy, finish construction on it, convert it to luxury apartments and have it ready for the first tenants to move in. The first lease at the newly christened "Sycamore Villas" was signed June 27.
"Only nine months from the day we first began our due diligence to the people actually moving in," said Mitchell Bradford, Sycamore Urban Properties' president. "I think this illustrates that SUP is not only a qualified investor and developer, but is actually performing extremely fast and aggressively to bring distressed assets back to the market and to economic viability."
The property might well have ended up as just another of the many abandoned developments scarring the landscape and burdening bank balance sheets. Instead, it's poised to become a stable, family-oriented community and a healthy investment producing returns for the same bank that once counted it as a toxic asset.
That bank was carrying the failing note on its books in the summer of 2008 when Sycamore Urban first learned about the property and expressed interest in acquiring the note. Things remained at a standstill until Sept. 25, when the bank notified Sycamore Urban that it would sell the note and even finance the deal, but only on condition that the transaction could be closed by the end of the quarter - just five days away.
Sycamore Urban succeeded in completing its due diligence to meet that deadline and seal the purchase on Sept. 30. The investment company was ready to move ahead and foreclose on the property when a new complication arose on Oct. 13: The original developer on the project filed for Chapter 11 bankruptcy, which spelled the end of plans to market the townhomes as condominiums selling for $400,000 and up.
"Like countless other projects right now they got caught by bad market timing which hit the Inland Empire harder than anywhere else," Bradford said.
Still, Sycamore Urban pressed to stay on schedule, working through various issues with the developer to resolve the bankruptcy quickly. By March 13 of this year, the investment company was able to complete the foreclosure and take possession of the property.
"We really learned that it takes day-to-day, sometimes hour-to-hour management of all the details of the project. It takes a lot of oversight and aggressive project management," Bradford said. "That's what Sycamore is able to do and it adds a tremendous amount of value."
Now the focus shifted from finances to finishing construction on eight of the units, which still needed to have hard surface flooring and stainless-steel appliances installed. Sycamore Urban also had to oversee construction of a tot lot and community pool, as well as install extensive landscaping.
By June, that work was completed and the apartments were ready to lease. Bradford said he expects there to be strong demand for the three- and four-bedroom units with two-car garages - all features that are relatively rare in the rental housing market.
Sycamore Urban's business model will allow it to lease out all the townhomes to stabilize the project in four to six months. After that point, it can either sell the five-acre property in bulk to another apartment-property investor or hold onto it until the housing market rebounds, eventually selling individual units as condominiums at retail.
He said Sycamore Urban currently has its eye on about 50 roughly similar properties, and expects to close on at least one other deal in the next few weeks.
"We would like to do this kind of project another 10 or 20 times," Bradford said. "And the properties are out there. Finding the properties is the easy part."
Sycamore Villas is located in western Rancho Cucamonga at the northwest corner of Baker Avenue and Arrow Highway. To contact the leasing office call 909-463-3232.
About Sycamore Urban Properties
Sycamore Urban Properties is a value-added, multifamily investor and developer focusing on the acquisition of partially or fully complete distressed condominium or apartment-to-condominium conversion projects in California, Arizona and Nevada. Our primary focus is to work with borrowers and/or banks to purchase distressed properties, including bank Real Estate Owned (REO) assets and/or notes. Each asset acquired will be completed and leased to stabilization with an intended holding period sufficient for market recovery. The disposition strategies will include sales of assets at attractive capitalization rates and returns or disposition via traditional retail sales programs. Visit us on the web at http://www.sycamoreprops.com