Arbors of Pleasant Valley

Little Rock, AR

Date Acquired: July 22, 2003
Purchase Price: $11,000,000
Date Sold: September 17, 2005
Sales Price: $13,150,000
Location: Little Rock, Arkansas
Leveraged IRR: 22.7%

Somerset (“SP”) purchased this 184 unit Class A property located in Little Rock, Arkansas as a stabilized investment. However, Somerset saw an opportunity for a higher yield via the implementation of a creative refinancing strategy. The property, built in 1998 was marketed and sold with a HUD 221 (d) (4) loan of $9.3M at an above market interest rate of 8+%. The new buyer had to assume the loan because it was “locked-out” until November 2003. Upon expiration of the lock-out period, Somerset refinanced the loan and replaced it with a fixed-rate CMBS loan of $10.3M at 5.52%. The new loan increased cash flow over $100,000 per year and allowed a distribution of refinance proceeds within four (4) months of closing. Somerset was able to further improve operations through capital improvements/upgrades and proactive asset management. When an oversupply of new multi-family product was anticipated in the Little Rock market in 2005, Somerset was in position to sell the asset and capture a solid profit.