Judge Robert Kwan of the U.S. Bankruptcy Court in the Central District of California approved a deal yesterday that allows a private equity firm to acquire three Bethany Group multifamily portfolios out of Chapter 11. The firm—identified only in court documents as Standard Austin Fund—will pick up some 5,000 units across 16 properties in Texas and Maryland for $400 million.

Essentially a sale of the original equity stake to Standard Austin, the deal removes the embattled Irvine, Calif.-based Bethany Group from any association with its former Maryland, Austin, and Lonestar (Houston) portfolios, although Bethany still retains ownership of certain Maryland properties not in the Maryland portfolio.

“It is a purchase of the assets. The existing equity will all be cancelled, the Standard Austin entity will own 100 percent of the equity of those three portfolios, and the lenders have agreed to stay in the game,” says Evan Smiley, a partner with Weiland, Golden, Smiley, Wang Ekvall & Strok, the Costa Mesa, Calif.-based law firm representing the Bethany Group. “Midland, the senior lender, agreed with Standard Austin to lower the interest rate and extend the terms of the original loan, and Standard Austin has already closed on the B-notes to BlackRock and Arbor.”

Smiley says the asset quality of the portfolios had drastically improved over the course of the past year, with occupancies across all properties above 90 percent. “That’ a big change from when we first got involved and some of the lights were out. Their properties have been well-run with good cash flow. We had approximately 25 parties [interested in the disposition] who signed nondisclosure agreements regarding the deal.”

Other Bethany assets may soon transfer to new owners as well. San Diego-based TriGild received more than 50 offers on the so-called Kingdom One portfolio, a collection of Phoenix assets that has yet to receive court approval for disposition. TriGild, which was appointed receiver of 13 Bethany assets, including a portion of the Kingdom One portfolio and it Colorado portfolio, has a court hearing in Florida on Feb. 25 where they will ask a judge to approve a sale. “The issue of a receiver selling property which has not yet been foreclosed is still being debated, and was unheard of until recently, but we have been successful so far,” says TriGild president Bill Hoffman. “But we believe federal law allows for such a sale, and we believe the court’s authorization to market properties and return for sale approval is a positive sign.”

Smiley could not reveal information regarding Standard Austin beyond what was available in court documents. The deal is expected to close within several days.