California Investor Buys REO Manzanita Gate Apartments in Reno for $27M

By Dees Stribling, Contributing Editor

Reno, Nev.—MG Properties Group (MGPG), a San Diego-based private real estate investor and operator, has acquired Manzanita Gate Apartments in Reno, Nev., for $27 million. The seller of the 324-unit REO multifamily property was a large Midwest-based loan servicer represented by Marcus & Millichap. MGPG represented itself in the transaction.

The acquisition was financed with a $21.6 million fixed-rate loan from Fannie Mae arranged by Key Bank Real Estate Capital. “Although underwriting standards are more stringent, lenders are increasingly willing to finance experienced and well-capitalized borrowers in secondary and tertiary markets like Reno,” Justin Smith, MGPG senior vice president, investments, tells MHN. “Agency financing in particular is extremely attractive by historical standards.”

This financing, Smith continues, “combined with a reasonable cap rate based on conservative in-place cash flow, has created an opportunity for significant positive leverage. MGPG believes this is an attractive arbitrage opportunity on a well-located asset in this market.”

Indeed, MGPG sees opportunity in the REO property, which offers of a mix of one- and two-bedroom units that average 940 square feet. “After more than a year of REO operations, the community wasn’t keeping up with the collections growth evidenced at other properties in the northwest Reno submarket,” says Mark Gleiberman, president of MGPG. The company plans to complete minor interior upgrades, update the common areas and remedy deferred maintenance issues, particularly involving the roofs and windows.

Since late 2010, MGPG has completed seven apartment acquisitions totaling 1,648 units at a value of more than $215 million. The company anticipates closing an additional $200 million in acquisitions within the next 12 months.