Recovering SF rental market allows developers to capitalize on debt bought during the recession

South Florida investors who bought up debt on foreclosed multi-family properties during the recession are now beginning to cash in on the rental-biased recovery. But despite real estate deals that can be as sweet as 50 cents on the dollar, this kind of risky investment involves its share of challenges, according to the Wall Street Journal.

For example, Miami Beach’s Alton Pointe, a 119-unit, nine building apartment complex, was acquired by Ram Realty for $13.1 million during a bankruptcy proceeding in 2009. The complex’s developer at that time was the controversial Michael Stern, who had just received immunity for acting as an undercover informant in a bribery probe – last month Stern was indicted on the unrelated allegation that he scammed Indianapolis Colts football player Dwight Freeney. When the complex was foreclosed upon Stern attempted to retain control of the property by filing for bankruptcy. Eventually Ram won Alton Pointe at auction, but 2009’s struggling housing market and the buildings’ connection to Stern nearly caused Ram to abandon the deal. It was only after extensively reviewing bank documents and Miami’s housing market that Ram Chairman Peter Cummings decided to move forward with the project. “Everyone was down on Miami,” said Cummings. “We believed that Miami was one of the great gateway cities.”

By the time Ram made the official purchase about 10 of the building’s units had been converted to condos and sold by Stern and one unit was boarded up; the remaining units were only about 50 percent occupied. Ram had to preform major renovations on the units and add a pool. Since that time occupancy in Alton Pointe, which is located at 1965 Alton Road, has risen to approximately 96 percent. In April Ram sold the property to a limited liability company called Alton Pointe for $20.44 million, netting Ram close to a $5.9 million return on its total investment. [WSJ]