2009 was a tougher-than-nails year to be buying apartments, what with economic uncertainty, lack of financing, seller reticence, and an expected wave of distress all affecting valuations and opportunities. As it turns out, the year was an inflection point in pricing and the beginning of a surge in apartment activity that has since seen deal volume rapidly accelerate and cap rates correspondingly compress. As the saying goes, if you bought in '09, you’re feeling fine.
Here’s how the top 10 mid-rise/high-rise deals (by dollar volume, according to Real Capital Analytics) have fared since switching hands at the nadir of the national recession:
The Asset: Dexter Park in Brookline, Mass.
The Price Tag: $129.5 million
The Buyer: Hamilton Co.
Where They Are Now: Boston-based local private powerhouse Hamilton Co. edged out national buyers that reportedly included Equity Residential for the biggest multifamily deal of the year. Hamilton still owns and operates the asset and continues to buy up Beantown metro apartments, though at decidedly lower price tags: The firm’s latest deals include 10 units in Brighton, Mass., for $2.4 million and a 48-unit garden property in Lexington, Mass., for $10 million.
The Asset: Warwick House in Arlington, Va.
The Price Tag: $109.5 million
The Buyer: Paradigm Cos. in joint venture with UBS
Where They Are Now: Originally developed by LCOR, the two-tower high-rise Warwick House was renamed The Meridian at Pentagon City by Paradigm shortly after purchase as part of a rebranding and renovation program that saw extensive common-area rehab, including consolidation of the property’s two fitness rooms into one, state-of-the-art fitness center. Rents currently range between $1,565 for a studio and $2,650 for a two-bedroom.
The Asset: Metropolitan at Pentagon Row in Arlington, Va.
The Price Tag: $99.5 million
The Buyer: Equity Residential
Where They Are Now: In one of the most hotly contested deals of 2009, New York City–based REIT Equity Residential nabbed this 326-unit high-rise in the D.C. metro after a 60-day sale that saw 40 bidders on the property previously owned by Hartford, Conn.–based Cornerstone Real Estate Advisors and managed by McLean, Va.–based Kettler. Equity still owns and operates the 2004-built asset that houses studio, one-, and two-bedroom apartments with amenities including a rooftop resident’s lounge with kitchen, a cyber café, and a rooftop swimming pool. The property has been renamed 1401 Joyce on Pentagon Row and is currently 97 percent occupied.
Credit: Behringer Harvard
The Gallery at NOHO Commons.
The Asset: The Gallery at NoHo Commons in North Hollywood, Calif.
The Price Tag: $96.0 million
The Buyer: Behringer Harvard
Where They Are Now: Typical of Dallas-based Behringer Harvard’s core-plus acquisitions for its Multifamily REIT I, The Gallery at NoHo Commons was constructed in 2007 and consists of five four-story residential buildings with Hollywood amenities including a resort-style swimming pool and spa, a state-of-the-art fitness center, and a social lounge and recording studio. Behringer Harvard continues to own and operate the asset, and rents currently range from $1,597 for a one-bedroom to $2,222 for a two-bedroom unit.
The Asset: Cityfront Place in Chicago
The Price Tag: $82 million
The Buyer: Crescent Heights
Where They Are Now: After holding the property for a mere 17 months, Chicago-based Crescent Heights sold Cityfront to Deutsche Bank–owned pension fund adviser RREEF for a reported $106 million. At the time of the flip, managing director of acquisitions at Naperville, Ill.–based Marquette Cos. Darren Sloniger, who also bid on the property, told Crain’s Chicago Business that “Crescent Heights is getting paid for taking a risk at a time when no one was willing to.” Lincoln Property Management currently operates the property for RREEF. Rents range from $1,167 for studios to $2,437 for two-bedroom apartments.
Credit: Lincoln Property Management
CityFront Place in Chicago increased in price from $82 to $106 million in just 17 months.
The Asset: Waterford Place in Dublin, Calif.
The Price Tag: $79.7 million
The Buyer: Behringer Harvard and PGGM
Where They Are Now: In May 2011, Behringer Harvard sold Waterford Place to institutional investor UBS for a reported $110 million after just a 20-month hold. "Our real estate team identified Waterford Place as an institutional-quality asset that had the potential to provide attractive income as well as capital appreciation for our investors," says Mark Alfieri, chief operating officer of Behringer Harvard Multifamily REIT I, which acquired the property in a joint venture with Dutch pension fund PGGM. "We're pleased that this demonstrates the effectiveness of our investment strategy and the value we can create in our multifamily portfolio."
The Asset: Allegro in Washington, D.C.
The Price Tag: $77.5 million
The Buyer: Federal Capital Partners
Where They Are Now: Only five bidders went after the 297-unit Allegro when the property went to foreclosure auction in November 2009. After bidding started at $60 million, Washington, D.C.–based real estate investor and developer Federal Capital Partners (FCP) took the property home for $77.5 million. FCP refinanced the property in June 2011 with a five-year, $80.5 million first trust loan provided by Aareal Capital. “The refinancing proceeds provided FCP with a significant realization for its Fund I investors,” says FCP Capital Markets senior vice president Steve Walsh. “The Allegro is a well-constructed, well-conceived luxury apartment community in one of D.C.’s hottest urban submarkets. The interest we received for the refinancing transaction reflects the quality of the investment and its strong market presence.”
The Asset: The Hermitage in Fairfax, Va.
The Price Tag: $71 million
The Buyer: AvalonBay Communities
Where They Are Now: Current rents at The Hermitage—which AvalonBay purchased at 95 percent occupancy in 2009—start at $1,250 for a one-bedroom and $1,530 for a two-bedroom unit. According to AvalonBay, the asset is technically a garden property. The Verona Apartments, a Seattle mid-rise property that AvalonBay also acquired in 2009, for $150,000 per door, is currently valued at $275,000 per door, a company spokesperson says.
The Asset: Cyan in Portland, Ore.
The Price Tag: $65 million
The Buyer: Behringer Harvard and PGGM
Where They Are Now: Dallas-based Behringer Harvard went green and high-barrier-to-entry with Cyan, a 16-story, LEED Gold Portland high-rise purchased in a joint venture with Dutch pension fund PGGM. “Cyan is representative of our continued focus on West Coast and Sunbelt markets that are positioned well for long-term rent growth and value appreciation," says Mark Alfieri, chief operating officer of Behringer Harvard Multifamily REIT I. "We are pleased to acquire an asset that offers a transit-oriented location, superior walkability and sustainability, as well as modern amenities and architectural significance. Cyan represents the future of the multifamily asset class." Behringer Harvard continues to own and operate the property.
The Asset: Lighthouse at Twin Lakes in Beltsville, Md.
The Price Tag: $60.5 million
The Buyer: Hampshire Properties
Where They Are Now: Brooklyn, N.Y.–based Hampshire Properties still owns the 700-unit Lighthouse at Twin Lakes, which is managed by McLean, Va.–based Kettler and is a cornerstone of Hampshire’s operational profit-driven, long-term–hold strategy. Rents currently range from $749 for studios to $1,850 for a three-bedroom unit.