Greensboro condominium complicated offered to Northeast traders
A South Carolina real estate investor claims that he repaired units and increased occupancy during his 5 year tenure as the owner of Timber Hollow Apartments in northeast Greensboro. But the new owners, like the seller, specialize in “distressed” real estate.
Nine months ago, many of the units in the Timber Hollow Apartments in northeast Greensboro were in disrepair. Squatting and water and electricity piracy were widespread in the low-income housing estate, according to a local housing advocate. One tenant, Natalie Carter, whose apartment became uninhabitable due to water damage and a collapsing ceiling, said the administration office was closed and tenants didn’t even know who should get their rent payments.
Eventually, after Carter found shelter for herself and her children in a nearby hotel, the city condemned her apartment in the 140-unit complex.
Carl Withers bought the two properties that make up the Timber Hollow Apartments in December 2013 for $ 1.25 million from an LLC owned by L. Worth Holleman Jr., a local attorney who died in 2015.
On September 28, Withers sold the apartment complex for $ 3.85 million to a couple of investors from New York and Boston.
“We buy distressed properties, fix them, and sell them,” Withers said.
In March, Brett Byerly, executive director of the Greensboro Housing Coalition estimated that only one-third to one-half of the apartments in the Timber Hollow Apartments were legally occupied. Byerly told City Beat that apartment building owners typically need to maintain 80 percent occupancy in order to earn decent income to service debt and keep up with repairs. Withers himself said in a 2016 podcast interview that when the occupancy rate is 60 to 70 percent, it is generally still possible to keep up with mortgage payments and costs. The low occupancy rate of the Timber Hollow Apartments raised a question: How was the owner able to make a profit on the investment?
Robert Kim, a South Carolina investor, suggested an answer.
As the member support coordinator for the Midlands Real Estate Investors Association in South Carolina, Kim said he decided to speak out against Withers because he wanted to protect members from bad investments.
Kim first reached out to Byerly in response to the announcement of challenges at another Greensboro apartment complex, Avalon Trace, which was also previously owned by Withers. Kim reached out to City Beat and said that Withers typically finances multi-family home investments through a syndication model that ensures Withers gets paid while its investors take the risk.
In response to the characterizations in the March 2018 article, Withers told City Beat that Kim doesn’t know what he’s talking about.
“He doesn’t know anything about what I’m doing,” said Withers.
Withers said he actually made a profit on the sale of Timber Hollow Apartments. Without specifying whether the deal has paid off for his investors, he said, “We committed ourselves. We used some outside money. You use a combination of this stuff. “
Withers describes his stake in Timber Hollow Apartments as the story of two troubled properties that he in good faith wanted to improve while dealing with tenants who failed to meet their responsibilities.
“Those properties were troubling,” said Withers. “We put money into it. No matter what you think, we’ve made it habitable. The ones we rented, safety, cleanliness and the like is always something we look at. The tenants are responsible for cleaning themselves. We had a lot of tenants out there who didn’t clean up. We take it, get it up and running no matter how much we have to do, and then we sell it. We did that with these two properties. “
Withers admitted the repairs were only partial.
“We didn’t fix all of these units; We fixed some of them, ”he said. “The units that we didn’t fix were boarded up. We had to squat a little longer.
“We bought this property and took it to a new level,” added Withers. “When we sold it there were more people in there than we bought it, so you see. We’d fix and fill a unit.”
Byerly said it was hard to believe that Withers had increased the number of tenants in the Timber Hollow Apartments over the past five years, although he had no problem believing that the investment made him money.
“I wouldn’t say he’s invested a lot,” said Byerly. “I would say he’s holding her and waiting for the market to come. The fact that these properties gain in value even without major investments shows that there is a lot of speculation on the property market. Withers doesn’t seem to do much with the property and then sell it for a profit. I think it’s just a symptom of where we are with the market and the lack of affordable housing. “
In September Withers sold Timber Hollow Apartments to Peter Auerbach of New York and Nicholas Leap of Boston.
Auerbach is the founder and CEO of Auerbach Funds, described as a real estate investment fund that invests in “Under-Managed Assets, Distressed Assets, REOs” [lender-owned properties], as well as risk-reducing developments in the retail, industrial, office, multi-family houses, medical practices and manufacturing asset classes, ”says the fund’s website. Auerbach’s biography suggests that he began his career in investment banking and asset management with Merrill Lynch and Credit Suisse and previously taught as an adjunct professor at New York University.
Nicholas Leap is a director of Nicas Group Capital, described on its website as “a vertically integrated, multi-family ownership group” focused “on light to distressed B- and C-class properties in the southeastern United States” . The website states: “We are targeting ‘workplaces’ in secondary and tertiary markets in metropolitan areas. When we first acquire these opportunities, they often struggle with occupancy problems, physical distress, deferred maintenance, crime, crime and therefore financially below average. “
Leap said Timber Hollow Apartments is one of three properties his company recently acquired that can be described as “distressed” and “low occupancy”.
“The industry has been rocked by a lot of owners who just don’t care about residents,” Leap said. “They don’t care about the community. They ram them into the ground. They only see them as a profit center. “
Leap said he understands that given the Timber Hollow Apartments history, people may be skeptical of a new owner targeting distressed properties while promising to turn them around. He mentioned that he and his family came to the US as refugees from Cambodia during the Khmer Rouge regime and lived in communities like Timber Hollow.
Leap said the first step in improving Timber Hollow is to invest $ 1 million in the property. The total is an average of $ 7,143 per unit. Leap said it would be hard to be specific about what will change under the new ownership, but the results will show once the work is done.
Speaking of corporate management, Leap said his company’s vertical integration allows site managers to focus on advocating residents while corporate headquarters in Boston worries about the bottom line.
Timber Hollow Apartments is one of three projects that Leap is realizing with Peter Auerbach. The other two are in Atlanta. Leap said he’s known Auerbach for less than a year, but the two men share many of the same values.
“He is a giving person; he’s made a huge donation to charity, ”Leap said. “He’s a great person. It is important to find a partner who believes what we believe. It aims at properties like this property. It creates value for residents and shareholders. “
Leap said his company is also working on acquiring Ashleigh Park Apartments, a similarly difficult, low-income residential community located near Timber Hollow owned by Withers and three other Florida and North Carolina investors.
“A lot of people think they’re in the housing business,” Leap said. “We are in the people business and in the community business. We try to get back to the roots of our existence. I always say that real estate management is no more about making money than being people to make blood. As humans we have to make blood to stay alive, but it is not the sum of what we are. “