RAINTREE PARTNERS' CEO Jeff Allen pegs Mountain View Apartments as a perfect value-added multifamily play. The 168-unit apartment community in San Dimas, Calif., is within 8 miles of more than 90,000 jobs and five colleges, sits near three freeways, and just underwent a partial renovation courtesy of prior owner AIMCO. The $21 million purchase of the Mountain View Apartments in December, along with the $38.25 million acquisition of the Trellis Square Apartments in Sunnyvale, Calif., last April, puts Raintree right in the middle of the value-add market. Just when those improvements will occur is still up in the air.

“The value-add strategy is not one that we are going to embark on right now simply because we can't generate the rents that we would need to offset the costs,” Allen says. “We bought them because of the opportunity to at some point complete the renovations to the interior units, improve the common areas, and generate a return on the investment. We just can't get the rent increase in today's world to make that happen.”

Which is just fine with Raintree. Backed by $200 million in equity from what Allen refers to only as “a major institutional pension fund,” Laguna Niguel, Calif.-based Raintree is seeking California assets for an eight- to 10-year hold where the firm can invest in hands-on property management and value-added capital improvements for an eventual disposition gain.

Both of Raintree's acquisitions this year were powered by 10-year, fixed-rate Fannie Mae financing at a loan-to-cost of approximately 75 percent. The Mountain View deal was debt assumption from an AIMCO loan just six months old, while the Trellis Square asset was new financing placed by Raintree.

Despite the all-cash posturing of major REIT players in the acquisition space, Raintree has not found sellers hesitant to work with agency-financed buyers. “So far, financing has not been an issue at the bidding table,” Allen says. “We have the capacity to close all equity, but I'd much rather have financing available to me when we close.” Considering that the Trellis Square loan, from application to close, came in at under 30 days, there's little worry on speed of execution, either.

Allen's one 2009 distressed acquisition regret? “In hindsight, I wish we were a little bit more aggressive. The deals we lost were because people were offering to pay just a little bit more than we were comfortable paying. Still, with patient capital behind him and agency financing at his side, Allen is certain that Raintree should be able to continue to add assets to the firm's portfolio.

“We're looking for B assets with a valueadded component in high-growth western markets,” Allen says. “If you hear of any, send them my way.”