Keys to Florida Real Estate Investing: Cash, Speed

A Florida real estate investor finalized a deal to acquire Snell Isle Apartments, a 272-unit, 12-acre waterfront complex in northeast St. Petersburg.

Ron Roan, of the Chicago-based Laramar Group, talked about the deal and the company’s plans with the St. Petersburg Times.

How did you acquire Snell Isle Apartments?

It was an extremely complicated transaction. Basically, we bought the note (from Florida home loan lender Wachovia Investment Holdings LLC) for about $30 million and then foreclosed (on Pinellas County developers Steve Spencer and John Loder). We did get it at a discount.

What are your plans for the complex?

We intend to run it as a high-end rental complex. We will spend $40,000 per unit in renovation, not the typical granite and stainless package, but new cabinets and counters and appliances. We’ll also enhance the pool, add a putting green, a water walkway, volleyball court, try to emphasize the lifestyle of enjoying the outdoors.

When will the complex be open for renters?

The entire rehab will take a year or more, but we will turn buildings as they are done. We’ll start next month and will have the first apartment available around Thanksgiving. We move extremely quickly.

What will the rents be?

We are still in the process of determining that. Before this, it was somewhat underutilized. It was in the average $700-800 range, and that is low. Ours will be substantially higher.

How did you work out such a discount?

We work with banks to help people who are upside-down (owe more than the asset is worth). With the fallout in the market the last few years, that happened to a lot of people, a lot of smart people. They get sort of trapped; there’s not enough cash flow or the building is already empty. And the Florida mortgage lenders don’t want to own these. It creates an opportunity for us because we have the cash and we’re able to move quickly.

Where do you get that kind of cash for such a transaction?

In December 2006, we closed the Laramar Multi-Family Value Fund, a $350 million investment fund, giving the company the ability to acquire $1.4 billion in value-add, multifamily real estate assets.

Did you start that fund expecting these kinds of market opportunities?

We do value-add Florida real estate investing, but we didn’t know the market would drop like this. It just timed out well.

Why did you choose this property?

It’s a remarkable location, 1,100 feet of waterfront in a desirable neighborhood. The barriers to entry in this area are high, but this was underutilized property. It’s so rare to find a location like that. That’s what attracted us to this deal.

Will you convert this to condos?

We intend to hold this long term as a rental. The Southwest Florida housing market has definitely swung back to rentals.

Are there more of these deals out there?

We’ve been seeing quite a bit of it throughout the state. We expect to see quite a bit. We have lots of cash and can move very quickly. Sometimes time is a big issue.

SOURCE: St. Petersburg Times