At first glance, Archstone-Smith's purchase of Oak Creek Apartments in Agoura Hills, Calif., was just another $99.6 million deal. Sure it was a lot of money, but the 24-building, 336-unit luxury multifamily community seemed a clear winner. Agoura Hills' median income of $85,000 and median age of 32 years old made it "a strong market for luxury multifamily product offering high-end amenities and the latest technology," according to Curtis Palmer of Colliers Seeley International, who represented Archstone-Smith in the transaction. What was groundbreaking about this particular deal was its timing. Archstone agreed to buy the property when it was less than half-leased, something unheard of at the time.

Developer JH Snyder had spent a year looking unsuccessfully for a buyer, despite a strong rental market. Buyers wanted at least 90 percent lease-up, and at its completion in October 2004, the property was still only 40 percent leased. "Very rarely at that time would buyers take such a leasing risk while paying full price," recalls Palmer. But the property seemed a good fit for Archstone-Smith's portfolio, so the broker thought the company might be interested enough to be flexible.

BANKING ON THE FUTURE: Archstone-Smith bought the Oak Creek Apartments in Agoura Hills, Calif.
BANKING ON THE FUTURE: Archstone-Smith bought the Oak Creek Apartments in Agoura Hills, Calif.

He was right. He helped negotiate a deal that saw Archstone closing on the property in January, with just 57 percent of its units leased.

Behind the Deal

Why was Archstone willing to stick its corporate neck out? Location, of course, was a big factor. In Agoura Hills, there was a dearth of good rentals, which guaranteed a healthy demand for the property. And, given the scarcity of land in the area, there was little prospect of rental competition in the future as well.

No wonder it appealed to Archstone. "Los Angeles County represents a significant component of our strategy to own apartments in highly desirable neighborhoods with expensive single-family homes and limited land upon which to build new housing," says R. Scot Sellers, Archstone's chairman and CEO.

Quality mattered, too. Oak Creek sits next to 14 acres of open space and includes roomy floor plans, bedroom suites with walk-in closets and private baths, and high-end finishes such as granite countertops