I have underwritten a number of broken condo deals over the years but never actually made a serious run at any. Was curious how these deals are viewed by the GSE lenders and the investment community as a whole. I recall many years back that depending on the % of units which were bulk vs. owned individually, Fannie and Freddie may/may not be willing to lend on the asset? Any truth to that, and if so, does anyone know what that threshold is?
I am looking at couple of these deals currently (Vegas and Phoenix) where 10-15% of the units had previously been sold and the balance are being sold as apartments. I gotta believe that there is some cap rate adjustment to be made here, similar to a ground lease deal, to account for the busted condo nature? i.e. buyer pool will be smaller given that they won't control 100% of the units?
Also, the deals are both sizable (200+ units), so I am also assuming that the buyer pools would be more institutional or quasi institutional, meaning they would be even more sensitive to the broken condo nature.
Thoughts?
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