Penderbrook Apartments in Fair Oaks, VA

A number of interested buyers have set their sights on converting the rental community to condo apartments, which is not possible under current zoning. Initial, favorable meetings with local authorities indicate a good prospect that the zoning change could be accomplished by September of this year.

In the meantime, underlying operating fundamentals have greatly improved at Penderbrook, with occupancy up to near 100%. Concessions have been slightly reduced, and rental rate increases have occurred for the first time in almost two years. Penderbrook investors received a special distribution in April, attributable to 2003 performance.

"Penderbrook is in the heart of a very strong housing market, and low mortgage interest rates have stimulated demand for condo residences," notes Vincent M. Sultana, vice president of W&M Properties in charge of residential property operations. "The decision to wait was made with the objective of changing the zoning and maximizing alternative outcomes as well as profiting from improved rental market conditions."

Penderbrook Apartments was acquired by a Wien & Malkin partnership in 1996. The property is part of a master-planned golf course community in the suburb of Fair Oaks, some 20 miles west of Washington, D.C.

If Penderbrook is sold, the proceeds may be reinvested to take advantage of "like-kind exchange" rules in Section 1031 of the Tax Code. This will enable investors to recognize a considerable gain but defer capital gains tax so long as funds from the sale are put into new real estate investments within set time guidelines.