The Villas at Southern Ridge is a 240-unit fractured condo complex near UVA. (Photo courtesy John B. Levy & Co.)
A Henrico-based real estate firm looked to Charlottesville to deploy the first slice of a $50 million pool of investor capital it secured earlier this year.
John B. Levy & Co. last month led the acquisition of the Villas at Southern Ridge, described as a “fractured” condo complex. Some of its 240 units are rented as apartments and others are structured as condominiums.
The firm paid $11 million for the property, which sits a couple miles southwest of UVA. The seller was Frye Properties out of Norfolk. The deal closed Nov. 19 and involved a joint venture between Levy & Co. and an unidentified insurance company as equity backer.
It marks the first acquisition made by Levy & Co. since it was entrusted by that same insurance company with $50 million earlier this year to put entirely into commercial real estate.
Bram Levy, the Innsbrook-based firm’s head of acquisitions, said the commpany has been hunting for transactions since taking on the capital in the spring but found attractive deals hard to come by.
“We’ve been looking throughout the year for the right opportunity to deploy it,” Levy said. “It’s been really challenging. We’re not having a hard time finding deals, we’re having a hard time finding good deals that make sense to us.”
Levy said the firm liked the Villas at Southern Ridge for its price and because it has options for realizing the upside in the future. Levy & Co. plans to put $1 million into renovations and then may look to convert more of the units into for-sale condos.
He said the firm also liked the property’s status as a fractured condo complex.
The Villas property was built as apartments in the 1970s and converted into for-sale condos in the mid-2000s. But only some of the units ended up selling, with the rest being held as apartments and rented out. Hence the “fractured” label.
That dual structure makes such properties somewhat difficult to handle.
“They are difficult for a lot of reasons,” Levy said. “Lenders are often scared of how to treat them. There’s both property management operations and condo association operations, so they are tricky assets.”
But Levy & Co. does have experience with such a complex. It acquired a fractured condo property, the Villas at Oakwood in Richmond’s East End, in 2022. That property was built by the same developer as the Southern Ridge complex decades ago.
Levy & Co. has the controlling stake in the Charlottesville property and is the managing member of the joint venture, while its insurance partner owns the remainder.
It’s the fifth deal the two sides have done together in the past few years and the first using the $50 million allocated to Levy & Co. earlier this year.
Levy & Co. has traditionally been a commercial real estate investment bank, helping line up debt and equity for real estate deals while occasionally making its own acquisitions. It also will often put its own money in on deals it helps finance, but this insurance equity allocation marks the first time it has done a deal of this structure.
For its side of the partnership, Levy & Co. agreed to put its own money into any deals using the insurance funds and it will take a fee on each transaction as the manager. The goal of the partnership is to exit each deal within three to seven years with the potential to replenish the $50 million pot in the future.
Levy said that while attractive deals have been hard to come by, the firm has several in the hopper.
He said the company will continue to look at what he referred to as workforce housing such as the Villas, as well as small-bay industrial and industrial-flex properties and retail properties. Central Virginia will remain the group’s focus area for now, he said.
Levy said the firm is eager but not in a rush.
“We need more deals. The money is not the problem, the deals are,” he said. “I guess we’re picky. We’d rather wait and play the capital for deals we’re confident in rather than rush to market.”