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RADCOs Meadowbrook Manor a 104unit property in Lilburn Ga
RADCO's Meadowbrook Manor, a 104-unit property in Lilburn, Ga.

RADCO Acquisitions Illustrate Growing Popularity of Turnaround Deals

It was a big Christmas for the RADCO Cos.. The firm, which focuses on buying troubled real estate to revive, bought itself thousands of apartments to turn around.

In just two weeks at the end of 2012, the Atlanta-based real estate company closed seven deals to buy multifamily properties totaling nearly 1,000 apartments, increasing its portfolio to 3,000 units, with more properties under contract and expected to close soon. All of the properties are located in Georgia, where RADCO has operated since 1994.

To put it another way, in the last weeks of 2012, RADCO grew its portfolio of apartments by nearly 50 percent.

"There is liquidity in multifamily, and the fundamentals make value-add multifamily the perfect fit for us today," says RADCO President and CEO Norman Radow.

RADCO’s deals in Georgia are part of a national trend. Apartment investors bought more than $9 billion in apartment properties for renovation or redevelopment in 2012, according to preliminary numbers from Real Capital Analytics. That’s up from $7 billion in 2011 and $3 billion in 2010. Rehab and renovation deals have made up well over 10 percent of overall apartment property deals in the recovery. The number of rehab deals has grown as the commercial real estate has recovered.

RADCO’s new properties include five under-performing assets that will probably require a significant repositioning effort and capital expenditures. They are: Audubon Town & Country, a 132-unit property in Fairburn, Ga.; Audubon Brook, a 94-unit property in Conyers, Ga.; Audubon Way, a 98-unit property located next to the Gwinnett County Medical Center in Lawrenceville, Ga.; and he Plaster Road portfolio, which is comprised of two adjoining apartment complexes Bella Villas (63 townhomes) and Wyntree (a 164-unit traditional apartment-style community), both in Doraville, Ga.

"The Audubon and Plaster Road portfolios meet our market to market strategy," says Radow. "We believe we are acquiring these five properties at a low basis and have good capital improvement, marketing and management plans to restore each to be competitive within their respective markets."

The other two properties need less work: Meadowbrook Manor, a 104-unit property in Lilburn, Ga.; and Park Lake, a 328-unit community in Norcross, Ga. that is institutionally owned, 96 percent occupied and located on a major thoroughfare in Atlanta's coveted Northern arc.

“Both properties are stable assets … a value on day one, with minimum capital required, strong existing cash flow and additional upside potential,” says Radow. Another property, The Pavilion at Decatur, which consists of 144 units near Emory University in Decatur, Ga., should close shortly.

RADCO financed the deals with bridge debt from several lenders and $15.2 million in equity raised over the past 30 days—all from private sources. "Our reputation has allowed us to raise equity privately, without resorting to institutional equity,” says Radow. “We have maximum flexibility to buy when and where we believe we can do the most good, and provide excellent returns to those who entrust us with their hard-earned capital."

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