ACORE Lends $48M on Troubled Florida Apartment Community
ACORE Capital has provided $47.5 million in bridge debt to allow borrower CGI Strategies to restore and stabilize a distressed luxury apartment community in Celebration, Fla., according to information from investment bank Dekel Capital, which arranged the financing.
The debt went towards funding CGI’s $43 million all-cash acquisition of the property from Southstar Capital Group; the proceeds will also fund the correction of previous construction deficiencies caused by an affiliate of Houston-based global asset manager Hines, who sold to Southstar, and a renovation of the units, prior to bringing the vacate property back to market.
CBRE’s Shelton Granade and Luke Wickham represented Southstar in the sale of the assets, according to information from CGI.
“We were able to demonstrate to the lender that once the construction issues are remediated, the property will be a first-to-rent, highly amenitized community in a burgeoning multifamily market, with tremendous demand drivers,” Dekel Capital Principal Shlomi Ronen said in a statement. “CGI is an experienced sponsor that has a track record of acquiring and remedying problematic real estate assets and successfully returning them to market.”
In February, CGI announced its acquisition of the property, at 1662 Celebration Boulevard in Celebration, a master-planned community near Walt Disney World Resort that was developed by Disney. Previously known as Aviva at Celebration, and then as Sola at Celebration, CGI will rebrand the complex as Astoria at Celebration.
Hines had purchased the 306-unit community in 2015 from its independently operated subsidiary Urban Oaks Builders and then subsequently sold it to Southstar the year following for $67 million.
Once Southstar took control of the asset, construction defects were discovered, the living conditions were deemed unsafe and in August 2017, hundreds of residents were ordered by Osceola County’s building department to vacate or stay at their own risk.
In a report, inspectors outlined such defects as cracked concrete and sloping floors, water all over the ceilings and roof as well as cracks in the ceilings near outdoor balconies, according to a report obtained by News 6 in Orlando.
After the notice to tenants, Southstar said it planned to reimburse tenants for that August’s rent, deposits and any moving expenses. A website—HelpSola.com—was even created to help guide the frustrated tenants.
In August 2018, Boca Raton-based Southstar announced that it was suing Hines for failing to make necessary repairs to the once-condemned apartment complex and for knowingly withholding, concealing and misrepresenting its defective conditions in its sale. Hines then sued its insurers and subcontractors for denying claims related to the problematic property.
CGI co-Founder and CEO Gidi Cohen said the firm will correct the unearthed deficiencies and stabilize the asset. CGI has gotten its renovation and construction plans approved by Osceola County, and the firm said in February that it expects the community will be “back to normal operations” by the end of this year.
“I’m sure there were many who looked at Sola and were turned away by the size and scope of the corrections that needed to be made,” Cohen said in a statement in February, following the acquisition. “Having successfully dealt with projects like this in the past, at our cost basis we were confident in our ability to remedy the problems and return a true Class-A resort style project to a market that exhibits exceptionally strong multifamily fundamentals.”
The 14-acre complex comprises six four-story buildings and houses a mix of one-, two- and three-bedroom units. The residences range in size from 741 square feet to 1,371 square feet, according to information from CGI. Amenities include a clubhouse, an internet café, a pool, a fitness studio, outdoor “summer kitchens” and a dog park.
In anticipation of its completion by the end of the year, CGI is currently marketing units at the complex.
With the addition of Astoria at Celebration, CGI’s Florida portfolio now comprises 1,000 multifamily units, all located within the greater Orlando area, the firm’s southeast region managing partner Mark Cohen said in February.
ACORE declined to comment on the transaction.