New York investors pay $3.7M for Tulsa apartment complex

Journal Record, The (Oklahoma City), Mar 26, 2008 by Kirby Lee Davis

A group of New York investors paid $3.7 million for the 121-unit Birch Place Apartments in east Tulsa.

Led by Asher Sussman of Brooklyn, the investors are considering other deals to complement their first Oklahoma property, said Bill Holloway of Tulsa's Holloway Properties, who has taken over management of Birch Place.

"They're looking at another property in Tulsa to try and buy," said Holloway, a 22-year veteran of the Tulsa multifamily market. "I think they're going to buy other properties in Tulsa, perhaps in Oklahoma City."

Tulsa County Courthouse records indicate Birch Place Apartments LLC paid $30,578.51 per unit to Shay & Klahr Properties Inc. for the 35-year-old complex at 10851 E. 33rd St. That price, brokered by Sherry Remy of Heritage Realtors, topped the $28,894-per-unit average pre-1980s construction sold for in 2007, according to the Tulsa market report by Commercial Realty Resources Co. of Norman.

"It's real good," analyst Aaron Hargrove said, especially for a 1973 property with no swimming pool or other traditional amenities. "Three point seven million seems like a great price. It's just kind of odd that it's gone down in value or it appears to have gone down in value from what it sold a few years ago."

Hargrove, managing partner of the Tulsa-based The Apartment Brokerage Team, pointed out Birch Place sold at least three times over the last four years in the $3.9 million range, the deals arranged by Heritage Realtors.

"As this price is going down, the market is stronger," said Hargrove. "Overall values have gone up."

Holloway, who became involved in the transaction three weeks before closing, said the lower price for the Class B or B- property could reflect too much exuberance by previous buyers during a period of rising sales activity.

"Plain and simple, I think the seller probably paid too much for it," said Holloway. "He had to bring a couple hundred thousand dollars at closing. It was crippling on him. He either had too high a loan to value mortgage on it or he paid too much for it; I don't know which. It could have been that he borrowed money for this property against another property; I don't know."

Although Birch Place units have no washer and dryer hookups, like most 1970s properties, Holloway said the 12-building site carries very strong fundamental values, with a 93-percent occupancy rate and a location just off U.S. Highway 169.

"Quite frankly, it's in pretty nice condition," he said. "Except for maybe six to 10 deadbeats they put in there.

"Right after we bought it we had some skips," he said. "I think the seller probably put some people in there just to fill it up because we had about six move out the week that we closed."

That left Birch Place with 15 vacancies, which Holloway is addressing.

"We had about 29 broken windows that were probably replaced by now," Holloway said of deferred maintenance needs. "There's some wood rot that will be addressed around the buildings, basically just to bring it up to a little better condition than it's in now."

Outside of normal cosmetic touches like paint and carpet, Holloway doubts the new owners will need to make many other improvements.

Rental rates at the three-employee complex run from $525 for Birch Place's 89 two-bedroom units to $449 for its 32 one-bedroom units, said Property Manager Ely Gonzalez.

"That's a rare thing in Tulsa," Hargrove said of the two-bedroom floor-plan dominance. "A good thing."

Reflecting its east Tulsa location, Holloway said about half of the Birch Place tenants are Hispanic.

"Some of them have been there four to five years," he said. "They're good people."

The high occupancy rate surprised Hargrove, who had heard of several property owners experiencing problems after the state's immigration law kicked in on Nov. 1.

"Some people left town and they were struggling a little bit with some vacancy on some deals over there," he said. "That east Tulsa market is the softest area in town and it has been for a few years."

Not having been associated with the property that long, Holloway could not address that.

"We're just going to be more selective and definitive about who we put in there," he said. "But we're only about 7 percent vacancy. I would think we could get that down to 5 percent. Five is what you shoot for."