Talk about an anxious first quarter of the year for Seattle-based Security Properties. In December, the multifamily apartment investor and owner/ operator of 17,000 units across 30 states was on the cusp of closing the note purchase on Chelsea Heights, a mixed-use, 78-unit condo reversion with 19,266 square feet of leased ground-floor office space in downtown Tacoma, Wash. Then, things got ugly. The borrower began fighting with the bank and filed for bankruptcy; the bank was attempting to foreclose on the property; and the guarantors of the loan sued the bank.

“It wasn't a friendly foreclosure, by any means,” says Security Properties chief investment officer David Dufenhorst. “Our challenge during the whole process was convincing the bank to continue to work with us on an off-market basis and not list the property."

In the last week of January, Chelsea Heights finally cleared foreclosure, and after eight weeks of construction completion to 28 units on the second floor, the bank (which Security cannot name per confidentiality agreements) sold the asset to Security in a $15 million, fee-simple deal announced April 4. Security now turns to lease-up at the property—which was 54 percent occupied as the firm took over operations—and has dispatched a leasing specialist team down to Tacoma to power up absorption.

That team's job could be completed quickly if Security can negotiate a master lease with Multi Care, one of the largest employers in Tacoma and current holder of a 10-year lease (plus two additional 10-year lease options) of the ground-floor office space at Chelsea Heights. Although requiring some additional negotiating beyond the leasing office, the strategy has already paid off for Security, which acquired the Entrada Apartments in San Diego for $22 million in July 2010 and master-leased the entire complex to the Thomas Jefferson School of Law just six months later.

The Tacoma market, with MultiCare and Army/Air Force facility Joint Base Lewis- McChord, offers good job-growth (and, consequently, rent-growth) prospects, regardless of whether a master lease is executed at Chelsea Heights. Similarly, Security continues to look for acquisition opportunities in Western markets with solid in-migration and/or employment-growth prospects and is also seeking institutional equity interested in partnering up with the company on its deals. At Chelsea Heights, Security went 20 percent in alongside New York City–based Real Estate Capital Partners.

“This was our first deal with Real Estate Capital Partners, which was a really great group," Dufenhorst says. “We like to partner, and a lot of traditional institutional investors have been on the sidelines, so we're out fostering new relationships."

Security intends to keep fostering new leasing relationships as well, particularly with partners that can go all-in themselves on a master deal. Until then, the firm will continue searching for those off-market opportunities and try to keep them off-market too. “Surprisingly, there's still not a lot of product available, and it's still hard to find deals that will pencil out,” Dufenhorst says.