California group buys Springfield apartments

The latest proof is a California investment group’s $7.5 million acquisition of Woodland Park Apartments and Sunset Place from seasoned apartment developer Sam Coryell Sr.

The investors, Dan Baker and Steve James, paid the asking price, according to Ken Schwab, the Wilhoit Properties agent who brokered the Nov. 4 deal.

That deal spawned another as Coryell took the sales proceeds and, through a 1031 tax-deferred exchange, purchased Abbey Apartments at Delaware and Erie from Don Bracy, who runs Debco Management. By doing so, Coryell avoided paying capital gains taxes on the sale.

Baker and James created Sunset and Woodland Properties LP to execute their purchase.

Baker, president of Green Valley Investments, is no stranger to the Springfield market.

Green Valley spent more than $1 million in mid-2004 to purchase eight buildings on Commercial Street for renovation as part of a continued revitalization effort in that district.

Schwab said investors from the East and West coasts see the value in investing in Springfield and southwest Missouri.

“The Springfield market seems to have appreciation, but at a very slow level,” Schwab said.

“If you look at West Coast and East Coast markets, they go up and draw back, then go up to new highs and draw back again. The experienced people in those markets sell at those times when they think they’ve hit peaks, like in the stock market, and take that money out and put it in areas where they find the growth to be more constant.”

Schwab said the use of a 1031 exchange – the name is taken from Internal Revenue Code Section 1031 – is a market force.

“It affects our market substantially, and I’d venture to say that some of us in the real estate market wouldn’t do as well without it,” he said.

“If you want the proceeds out of your sale, it’s not the way to go. But for those parties that say ‘No I don’t want to be taxed, I’ll leave my proceeds in and reinvest them,’ the 1031 exchange method is the right way to go.”

Coryell and his son Sam Jr. own five apartment complexes and are in the process of building three others under the corporate names TLC Properties LLC and Coryell Enterprises Inc.

The two have purchased land near Interstate 44 next to Cracker Barrel for development of a ninth complex.

Coryell Sr. said he put Sunset Place and Woodland Park up for sale because they were beginning to age. Sunset Place is 10 years old, and Woodland Park is six years old.

“When they get that old it gets a little tougher. You have to spend a lot more money on them,” he said.

Coryell said The Abbey appealed to him because, in addition to its ideal southeast Springfield location, it had something few complexes in that part of the city have – room for expansion.

“We’d been wanting to get some land on the east side, and it’s hard to find land that’s zoned for apartments,” he said. “(The Abbey) has nine acres that aren’t developed, and since we’re builders, we’re going to complete the project.”

What is a 1031 tax-deferred exchange?

Internal Revenue Code Section 1031 allows the deferment of capital gains taxes owed on the sale of property if the proceeds are used to buy a similar type of property.

There are restrictions on whether an exchange qualifies:

• Both properties must be held for use in trade, business or investment, though the property uses don’t have to be identical.

• Property for personal usedoesn’t qualify.

• A qualified intermediary, called an accommodator, must be used. The accommodator must handle all the money involved in the sale and must be totally independent of both parties.

• The seller must identify one or more potential exchange properties within 45 days, and one or more of those properties must be purchased within 180 days.

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