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Sprawling Richmond Apt. Portfolio Up for Grabs

Bids for The Gallery Midtown, Collection Midtown Should Hit $57 Million
January 23, 2018
A portfolio of Richmond, VA apartments with a storied history is on the selling block.

The Gallery Midtown and the Collection Midtown, in the city’s Museum District, are being shopped by Newmark’s Apartment Realty Advisors arm. The seller, a partnership between the Davis Cos., of Boston, and local operator Spy Rock Real Estate Group, acquired the portfolio in 2015 at auction, after the previous owner pleaded guilty to a tax credit scam and lost the properties to the federal government.

The 376-unit portfolio is ripe for renovation, with many of the apartments spread across 20 buildings developed a century ago. Market players think the bids for the portfolio will hit $57 million, or slightly more than $150,000 per unit. Both the Gallery and the Collection are located near the hip Carytown neighborhood of Richmond, and bidders can vie for one or both of the assets.

The Davis Cos. partnership has renovated many of the 157 units at the Gallery, a garden-style complex built in 1958. It is located at 308 N. Nansemond St. and offers a mix of one- and two-bedroom apartments. The property features a pool, a fitness center, grill stations and a resident clubhouse.

But the units in the Collection, a sprawling 20-property townhome asset, have not seen much attention in recent years. A new owner could upgrade the interiors and common areas as way to raise rents competitive with newer product in the area.

Like many metro areas, Richmond has seen a steady stream of new development of core, downtown rentals. That has pushed the vacancy rate up, to 7.2% market wide, from about 6.5% at the start of 2016, according to CoStar research. Another 2,800 units - or about 3.5% of existing inventory - are under construction now.

Still, employment is strong, helping keep demand for rentals high. Capital One, Owens & Minor and the CoStar Group have all added space and new hires in the last year.

The properties on offer from the Davis Cos./Spy Rock partnership were previously owned by River City Real Estate, headed by Richmond landlord Billy Jefferson. Jefferson was accused in both state and federal court of misusing about $13 million in tax credits intended to renovate older, dilapidated housing.

His case, which featured testimony about lavish Las Vegas spending sprees, a jailhouse wedding and a plot to flee to England, riveted Richmond in 2014 when he pleaded guilty in federal court. He received a 20-year prison sentence and forfeited much of his real estate holding as restitution.

John Doherty, Multifamily Reporter  CoStar Group   

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