Perhaps the most talked about deal of 2012 was the Lehman–Bank of America–Barclays buyout of the Archstone portfolio. After all, the deal was worth a rumored $9.4 billion and transferred a controlling stake in more than 67,000 units across the country.
In case you missed it, Archstone was first bought by Lehman just prior to the investment bank’s collapse. When Lehman failed, it was forced to sell 26.5 percent of Archstone to a joint venture between Bank of America and Barclays to pay off some of its debt.
In July, Lehman repurchased the remaining stake in the company and has been selling off Archstone’s assets to recoup some of its financial losses ever since. And thrown into the mix was Equity Residential, which made an ultimately unsuccessful play at buying the 26.5 percent stake.
But there were many other deals this year that had a significant impact on their respective companies and markets. While they might not have approached the blockbuster status and intrigue of the Archstone deal, each was more than noteworthy in its own way.
Big Fish, Big Pond
The country’s largest apartment REIT grew larger in the Big Apple after purchasing the Beatrice, located in the heart of Manhattan’s Chelsea neighborhood at 105 West 29th Street. The mixed-use property offers spectacular views of the New York City skyline, including the Empire State Building, the Hudson River, and towering midtown landmarks, and includes several restaurants and retail space.
Chicago-based Equity Residential snatched up the property in June, for a price tag of $280 million. The sellers were the project’s locally based co-developers, JD Carlisle Development Corp. and DLJ Real Estate Capital Partners. The 30-story luxury high-rise sits atop the 26-story Eventi hotel and houses 301 units with floor-to-ceiling windows.
The deal gives Equity Residential another foothold in the thriving Manhattan apartment market at a time when rents are being pushed to historic levels. Monthly rents at the Beatrice are said to range from $2,983 for a studio to $16,795 for a three-bedroom unit. Even given those sky-high rents, the property was fully leased just six months after opening in August 2010.
A Landmark Recap
In a behemoth of a portfolio sale, Richmond, Va.–based Landmark Apartment Trust of America (LATA), formerly known as Apartment Trust of America, scooped up 21 communities with more than 6,100 units valued at $485 million.
With this transaction, part of a larger recapitalization, the company more than doubled the number of multifamily units in its portfolio. The transaction included exchanges in $187 million in partnership interests and $16 million in cash, with the assumption of $282 million in debt on the properties. With this deal behind it, Landmark now owns 10,000 units in 17 markets and manages almost 12,000 units outside its portfolio.
Things Are Looking OK
The Lincoln at Central Park in Oklahoma City, Okla., proved to be a monumental score for Philadelphia-based GoldOller Real Estate Investments when it inked a deal for the property in May for $76.9 million. At $109,000 a door, the sale was the largest deal in OKC since 2008 and the largest single-asset transaction in the city’s history.
The Lincoln was built in two phases, in 2007 and 2009, and GoldOller assumed a $22.24 million Freddie Mac loan in acquiring Phase 1, while paying out cash and using fresh financing for Phase 2. The 708-unit complex comprises 17 buildings and was 96 percent occupied at the time of the sale.
GoldOller is a two-year-old fund affiliated with Philadelphia-based Multifamily Management Services, which owns about 30,000 properties, mostly on the East Coast.
Thanks to Silicon Valley’s booming tech economy and job growth, San Jose’s apartment market has been among the strongest in the country the past few years. And at $118 million, the sale of the 360 Residences is among the largest transactions in San Jose in 2012.
Originally built as luxury for-sale homes in 2009, the 360 Residences quickly fell victim to the downturn, and Chicago-based developer Mesa Development stopped making payments on the community. That’s when Beverly Hills, Calif.–based Kennedy Wilson stepped in to buy the note on the property from US Bank at a foreclosure auction while it was still under construction.
Vacant, and filled with unfinished interiors, the units that were in escrow saw the bottom fall out. So Kennedy Wilson decided to convert them to apartment rentals and invested $2 million to finish the interiors in March 2011, staging the work floor by floor as leasing went on. The company converted one unit into a leasing office and also upgraded amenities such as the pool area.
Thirteen months after buying the 360 Residences, Kennedy Wilson sold it to Chicago-based Capri Capital Partners for $118 million.
In August, a joint venture between San Antonio–based Lynd and Miami Lakes, Fla.–based Florida Value Partners purchased the $200 million unpaid principal balance on a 20-property portfolio containing 3,241 units. The communities are spread out across Florida, Georgia, South Carolina, Virginia, California, Colorado, and Texas.
The acquisition came in the form of a court-appointed receivership sale for an undisclosed sum. These types of distressed transactions are right in Lynd’s sweet spot, as the company has purchased more than $875 million in unpaid principal balances on distressed real estate notes since 2010.
This is just the first deal of many for the two business partners, which formed a new joint investment fund for the deal. The companies plan to do a substantial rehab to the portfolio.
Austin, Texas–based student housing giant American Campus Communities (ACC) acquired a portfolio that spans seven states for $863 million from Kayne Anderson Capital Advisors in October. The 19 student housing properties consist of 12,049 beds near universities like Michigan State, Texas Tech, and the University of Southern California, among others. The deal was the largest apartment transaction of the year, excluding Lehman’s Archstone deal, as of press time.
ACC assumed about $396.2 million in outstanding debt and paid about $466.6 million through a combination of cash on hand, debt from its revolving credit line, a bridge loan, and the sale of debt or stock. In fact, the company is selling 10 million shares of common stock to help fund the purchase. ACC plans to invest about $12.3 million in upgrades.
This was the second large portfolio deal this year for ACC, which closed its acquisition of a 15-asset portfolio for $627 million from Campus Acquisitions in September.
Highlands Ranch, Colo.–based UDR inked a huge deal back in January when it added 710 new units to its portfolio by buying Columbus Square, a five-tower apartment complex in New York City. UDR partnered with MetLife on the deal, and the seller was a partnership of Stellar Management and the Chetrit Group, which developed Columbus Square on land it purchased from disgraced New York real estate maven Leona Helmsley. The $630 million buy gives the company a grip on Manhattan’s Upper West Side, with some of the highest rental rates (and still rising) in the country.
As the saying goes, when one door closes, another opens. This couldn’t be truer for Phoenix-based Alliance Residential and its Broadstone Domaine community in Seattle. Alliance bought the note for the property, a partially constructed condo deal, for just $19.5 million in 2010. The project was initially developed by Intracorp Seattle in 2007 and was foreclosed in October 2008 by KeyBank and LPSL Corporate Services, which said the developer owed it $20.6 million in principal and interest.
One of the hurdles the company had to overcome was the lack of amenity spaces. So, Alliance decided to convert three live/work units to a leasing office, clubroom, and fitness center, to bring the community more in line with renter expectations. After repositioning and rebranding the property, Alliance sold the 91-unit building to Essex Property Trust in September for $33.9 million, representing the first time a Seattle property that lacks a commercial component sold for more than $400,000 a door.