The trio of LEDIC Management Group, NationsBank Community Development Corporation and Freddie Mac has returned a large portfolio of distressed 1970-vintage Atlanta properties to attractive, affordable housing. With a history of managing and brokering for Freddie Mac, Memphis-based LEDIC was invited in 1992 to inspect 65 of its foreclosed Atlanta properties. The objective was to accumulate a portfolio of moderate-income multifamily housing for the CDC subsidiary of Nationsbank. On April 1, 1993, SPL Corporation, theaffiliate of LEDIC, brokered to Nationsbank an 11-property portfolio consisting of 2,811 units for $23 million, representing the largest apartment transaction in Atlanta's history.
The property selection criteria was based on Nationsbank's objective of meeting Atlanta's affordable housing needs for the lowest per unit total acquisition and rehab investment. Steve Rudesill of SPL Corporation developed the economic feasibility model that helped generate the offer. James S. Grauley, vice president of NationsBank CDC in Atlanta, says, "The most challenging initial assignment facing LEDIC was the physical, marketing and financial due diligence required on such a large portfolio so that NationsBank could with confidence prioritize the properties for negotiating a package purchase." Freddie Mac had done a good job correcting life/safety issues and positioning the properties for sale, but because of significant deferred maintenance, occupancy averaged only 65 percent and rents averaged $375 per unit.
Because of its experience rehabilitating distressed apartments, LEDIC was selected by NationsBank to assume responsibility of the portfolio under a long-term management agreement. In addition to performing the due diligence and implementing a detailed management and marketing plan, LEDIC developed a major renovation program totalling $12 million. All down units were restored and deferred maintenance corrected, but more importantly, the properties were repositioned within their markets. Physical improvements included siding replacement, roofing, asphalt, landscaping, signage, improved exterior lighting, new appliances, carpeting and painting. According to Russell E. Spornberger, senior vice president and manager ofServices for LEDIC, "A major emphasis was to ensure control of ingress and egress for our residents. Perimeter fencing and controlled access gates were installed wherever possible."
Planning, renovation, lease-up and stabilization was completed on schedule in just 15 months. "By July 1, 1994, occupancies averaged 95 percent and rents had increased 28 percent to an average of $480 per unit," says Denise C. Koehl, LEDIC's senior vice president of Apartment Operations for the Atlanta region. Rent collections have climbed steadily, and recent appraised value of the 11 properties is in excess of $50 million. Such profits afford NationsBank the opportunity to reinvest in other communities. "These apartment communities are proof that attractive, affordable housing can be returned to a city's inventory when the right team is assembled," states Ken W. Edmundson, president and chief operating officer of LEDIC.
NationsBank and LEDIC continue to support the Atlanta community with their unique "Make a Difference" learning enhancement centers. These facilities house activities for the entire family that focus on daily living issues, such as study skills, computers usage, personal safety and personal financial planning. Deborah Jones is LEDIC's fulltime director.
"NationsBank has directed SPL Corporation and LEDIC to seek acquisitions in other southeast U.S. markets," says David L. Shores, executive vice president and director of Business Development for LEDIC. J. Michael Pitchford, president of NationsBank Community Development Corporation, states, "The enhancement in value and cash flow of the Atlanta portfolio as a result of LEDIC's work is outstanding. We are looking for more apartments to buy, but we won't stray from LEDIC's territory."
LEDIC fee manages 20,000 units throughout the Southeast with fully staffed regional offices in Memphis, Nashville and Atlanta. Its apartment market reports are considered the most comprehensive in the industry.
"A company is recognized for the clients it serves and for the challenges with which it is entrusted. This project makes us proud on both counts," remarks Scott P. Ledbetter, chairman and CEO of SPL Corporation and LEDIC.