Courtesy / Malone Commercial Brokers
9 Washington St. was built in 1821. Abodo.com lists a one-bedroom rental unit there at $678, compared with a market average of $1,407.
June 1, 2020
Deal for Augusta residential parcel was already complicated before the pandemic
Courtesy / Malone Commercial Brokers
9 Boothby St., built in 1920 and containing six residential units, was one of 44 buildings and five vacant lots sold as a single portfolio.
A Maine-based investment group acquired a portfolio of 44 multi-unit residential buildings in Augusta after some fairly complex proceedings that were made all the more difficult when the pandemic struck.
Multivision Investments LLC bought the portfolio from Jim Pepin of Sprague & Curtis Real Estate in Augusta for $5.75 million. Brandon Mitchell of Malone Commercial Brokers represented the buyer in the deal, which closed March 31.
The buildings range from one to 11 units. Over half of the properties are either three, four or five units. There are 204 units across the 44 buildings. The deal also included five vacant lots and an existing property management business, with a management office, supplies and equipment. The business and its employees will remain in place.
Multivision is a Maine-based group of commercial and residential real estate investors with a focus on multifamily acquisitions.
Sheer size
Mitchell was tasked by Multivision to find or assemble a portfolio of multi-unit buildings. Preferences included a central Maine location with properties in close proximity to ease the scope of property management.
Multivision toured the properties last September and October. The portfolio went under contract in November.
Originally, a December closing was planned, but the sheer size of the deal multiplied the steps that needed to be taken to complete the process, including 44 building appraisals and 49 title searches (including the vacant lots). Fifteen of the properties were used as samples for inspections and 18 underwent a phase 1 environmental assessment, a common procedure for older properties to identify potential contamination from a previous use.
TD Bank financed the purchase. The buyer had worked with Dustin Carson, TD Bank’s vice president of commercial lending, on another purchase. The financing was approved in late February. When the pandemic began to shut down business operations, the transaction went into remote-control mode and the closing was extended to March 31.
Moving parts
Mitchell developed a relationship with the buyers behind Multivision when he represented them in the acquisition of four multi-family buildings at 6-38 Central Ave. and 34-73 Bluff Road in Bath, which closed in February 2019.
When the group approached Mitchell last year, the Augusta portfolio had just hit the market, he said.
“All of a sudden we saw 204 units and we said, ‘Whoa, let’s take a look at this,’” he recalled. “As we dug into it, the better it got. We started seeing consistent trends.”
For example, some of the exteriors were rough but the interiors were in good shape.
“You could tell that’s where the seller had invested his money — the living spaces and the systems,” Mitchell said.
Teamwork was essential to the successful completion of the sale, Mitchell noted.
“We were all working together hourly to put things together,” he said. “It was such a big undertaking: myself, the buyers, and the seller and his wife, who runs the property management company. For the size of the transaction and all the moving parts, that’s what needed to happen in order for it to be successful.”
Mitchell credited the various parties who helped ensure the success of the transaction and turned to remote operation through the pandemic. That included Michelle Peacock, an administrator at Malone Commercial Brokers, who helped with document preparations, due diligence, coordination and communications; legal teams for the buyer and seller; and TD Bank and Carson.
“Through thick and thin they were right there with us,” he said of the bank. “The most scary thing was when the whole world shut down, we didn’t know what the bank’s appetite would be to finance the whole thing. Dustin said, ‘We gave you our commitment and we’re going to honor that commitment.’”
Mitchell, who has worked with Carson on several deals, noted that relationships and good communication can be key to a successful deal.
“Dustin was always available,” he said. “TD Bank has a small-town feel, but they’re a massive bank with a lot of horsepower.”
30-year project
The seller, Jim Pepin, assembled the properties over a 30-year span.
“As the years went on, the portfolio grew,” he said. “I would buy buildings periodically when I felt market conditions were right.”
Pepin was born and raised in Augusta and now lives in Sidney. He’s a long-time Realtor with Sprague & Curtis and also owns a home building company, Jim Pepin Homes LLC. Real estate investment started out as a sideline and grew.
“Sometimes these things take on a life of their own,” he said.
The properties are located within a half-mile of each other. Many are on Northern Avenue, Washington Street, Mt. Vernon Avenue, Bridge Street, Green Street and Chapel Street, he said. The average age of the buildings is 100 years old.
At the time he bought them, some were foreclosed on and/or not in great condition.
“I’d come in, purchase it and make the initial investment” to upgrade the buildings, he said. That included installation of natural gas boilers in almost all the buildings, plus electrical system and roof upgrades.
Other buildings were more turnkey.
Cash flow is key
“I used existing cash flow to plow huge amounts of money back into existing units,” he explained. “The objective was to keep occupancy and cash flow up. As the cash flow grew, the ability to purchase more buildings was there as well.”
Over the course of time, the strategy worked well, he said.
“You have to have good management and maintenance programs,” he continued. “When you have all that in place, you should do pretty well.”
The buildings’ proximity to each other lends itself to ease of management, he said.
“I didn’t want to travel many miles to maintain that many buildings,” he said. “I didn’t see the good sense in doing that. Keeping them all local and within a stone’s throw of one another makes more economic sense from the standpoint for management.”
Still with an eye toward market conditions, Pepin decided to list the properties because apartments are in high demand now, he said.
In the short time that the portfolio was on the market, he received multiple offers.
“I wanted the right buyer who had the ability to manage all these buildings and keep the staff and do well at the end of the day,” he said. “There’s a time to buy and a time to sell and move on. Market conditions were conducive to selling the portfolio as a whole. The buyers agreed to keep all of the current staff in place, which was very important to me and my wife. That’s what made the deal. We have good long-term employees and I wanted to make sure they stayed.”
Pepin said he’ll now focus on redeveloping 99 Western Ave., a vacant and blighted 25,000-square-foot office building on a 1.12-acre lot that he bought last December for $100,000.
The plan is to demolish the building and put up a 53-unit senior housing project with amenities such as a recreation room, workout faculties and under-the-building parking.
PHOTO / MAUREEN MILLIKEN
Developer Jim Pepin plans to demolish the building at 99 Western Ave. and build a senior apartment complex.
“There’s demand for senior housing in Augusta,” he said.
Pepin is scheduled to go to the Augusta Planning Board on June 9 for a rezoning application related to the project.
The portfoli’s buyer, Multivision, owns Capital Property Management LLC, a property management company in Augusta.
The group's overall strategy allows for moderate renovations that bring upside to tenants as well as the landlord, according to a news release. The property management aspect will allow the buyer to continue to manage the existing portfolio.
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