$4.9-Mil Buy Wraps Up Series of 1031 Exchanges

PHOENIX-A domino 1031 exchange has shored up an Arizona portfolio for a relocated Colorado buyer and catapults the Scottsdale-based seller into the owner of a soon-to-be-completed class A multifamily holding in Phoenix.

Farnam Realty Inc. used a 1031 reverse exchange to close the $25-million acquisition of a multifamily property under development at the intersection of Lindsay and Southern avenues in Phoenix by Mark-Taylor Inc. Farnam sold the 126-unit Desert View complex in Mesa and 117-unit Fairmount Greens Apartments in Phoenix to drive the 1031 reverse, John Kobierowski, senior investment adviser at Phoenix-based Hendricks & Partners, tells GlobeSt.com.

The multiple transactions got under way earlier this year when Lloyd Cunningham, now a metro Phoenix resident, sold four Colorado-area multifamily and retail properties and jumpstarted a reinvestment and trading up in Arizona. He relocated from Colorado Springs to metro Phoenix while the deals were coming to fruition.

Desert View, located at 303 E. Broadway, was the final piece of the puzzle and completes Cunningham’s 1031 requirements, says Kobierowski. Cunningham paid $4.9 million for the 87%-occupied complex, built in 1985. The holding brought $39,286 per unit or just a shade under the region’s average.

Kobierowski and Greg Thielen, a Hendricks & Partners’ senior adviser, represented Cunningham in three of the four buys, closing packages totaling about $12 million. Todd Braun and Bert Kempfert, both of CB Richard Ellis Inc.’s Phoenix office, handled all of Farnam’s transactions related to the sales and acquisition.

In late September, Cunningham paid $3.9 million for the 93%-occupied Fairmount Greens, located at 3851 N. 28th St. The Phoenix complex was built in 1973. In February, Cunningham bought the 16-year-old, 40-unit North Mountain Vista in Phoenix for $1.2 million. In July, he spent $3.1 million for the 29-year-old, 80-unit Rio Vista in Mesa.

“This is something that everybody’s doing,” Kobierowksi says. “They’re taking advantage of low-interest rates, selling older product and moving into something newer.”

In many cases, the buyers aren’t new to the Arizona multifamily market. REITs, pension funds and private investors alike are being tempted by the marketplace.

In late September, the Kobierowski-Thielen team drew five bidders on a premier property in Show Low, a second-home mountain area rapidly becoming a favorite four-seasons address. The fully occupied, 36-unit Mountain Top Village Apartments at 4850 S. White Mountain Rd. was bought for about $2.2 million by private investor, Bonnie Dee Fullerton of Washington state, who hawked a Portland property for her 1031 exchange. Mountain Top Village, owned by Phoenix-developer John Cheney, was under contract in less than a month of coming to market, says Kobierowski. “There’s been no slowdown at all,” he says. “I am pushing 60 to 70 hours a week to keep up with the market.