College Plaza III is a 21-unit multi-family building located 2 blocks from NAIT (Northern Alberta Institute of Technology). It was never listed for sale, but belonged to a client for whom we had done some consulting work.
The property was previously owned by a doctor who owned several other buildings in the area. He had intended to convert them all to condos and resell the condo units at a premium. Unfortunately, he had purchased in 2007 at the height of the real estate boom. When the market crashed, he was unable to sustain the debt-servicing and declared bankruptcy. Our client purchased College Plaza III out of foreclosure along with two of the other buildings.
As it happened, the ‘condo doctor’ had purchased the building from another friend and client of ours who owns a large multi-family portfolio, so we had quite a bit of perspective on the history of the property and the upgrades that had been done.
The biggest challenge with the project was the tenant profile. Several tenants were not paying rent regularly. Some had caused substantial damage to their suites. We also discovered two tenants were actively dealing drugs from their units. After 2 months of cleaning house, we had 10 suites vacant out of 21.
Fortunately we had set aside an adequate reserve. The rapid turnaround became a blessing in disguise as it allowed us to renovate half the building in one swoop. Within 9 months, we had the building back to full occupancy, increased the NOI by approximately $32k, and raised the building valuation by over $500k. In the interim, our partnership has declined two unsolicited written offers that have further substantiated this valuation.