Edgewater Hills, one of three facilities containing 1,000 apartment units owned by Capital Properties in Framingham, is part of a 3,300-unit East Coast multifamily portfolio that Cushman & Wakefield of New England will market for sale.
Despite vacancy rates nearing 10 percent at some of its developments, the Capital Properties East Coast apartment portfolio will be a popular target for investors, brokers for the 5,600-unit offering predicted last week.
“It will get a tremendous amount of attention,” said Marci Griffith Loeber, a principal with Cushman & Wakefield of New England, whose investment sales group is handling the brokerage assignment for the Northeast portion of the portfolio. C&WNE President Robert E. Griffin Jr. estimated last week that the entire package could fetch as much as $800 million.
Capital principal Richard D. Cohen referred calls regarding the deal to Griffith Loeber, who said she anticipates a range of financing sources will chase the opportunity, either in total or broken up into specific pieces. C&WNE has teamed up with Eastdil Realty of New York to market the units, with Eastdil handling apartments in the mid-Atlantic region and C&WNE peddling some 3,300 apartments in Massachusetts and Connecticut.
Totaling just over 2,200 apartments, the Bay State assets have a concentration in Framingham, where more than 1,000 units are located in three developments operated under the Edgewater brand. Although the occupancy rate in the Edgewater apartments has fallen to 90 percent, Griffith Loeber said the increased vacancies are not an indictment of the three properties themselves, but rather reflects the region’s economic doldrums.
“It’s lower than normal, but that’s where the market is right now,” she said, adding, “the occupancy will definitely pick up.” While some observers have questioned the age of the Capital apartments, many of which date back to the 1970s, Griffith Loeber said the ownership group has made substantial renovations over the years, including a recent program of restoring kitchens and bathrooms upon a tenant’s departure.
“It has been impeccably maintained, both inside and out,” she said of the portfolio. Another prime factor that newer apartments cannot match, Griffith Loeber further stressed, is the location of the Capital apartments. As in the case of Framingham, many Northeast communities have become adept at blocking new apartment construction in recent years, helping ensure competition will be kept in check going forward.
Besides the Bay State apartments, C&WNE will market two prime Connecticut apartment projects, including the 944-unit Century Hills development in Middletown and a 174-unit complex in West Hartford. Eastdil’s responsibility will include apartments in the New Jersey and Philadelphia markets, as well as Washington, D.C., and Atlanta.
Strong Reaction
Griffith Loeber said C&WNE will work in tandem with Eastdil to sell the portfolio, with a range of possible scenarios being provided for investors. The simplest would be a complete acquisition of the portfolio by one buyer, but the package is also being listed geographically, so it could be split into the Northeast and mid-Atlantic portions.
The Capital assignment certainly gives C&WNE another major listing to kick off the New Year, and advances the group’s reputation as a leading broker of multifamily properties. Along with an apartment complex it is currently selling in Malden, C&WNE last year negotiated the sale of the Longwood Towers apartment development in Brookline for $80.1 million, or about $293,000 per unit.
That deal added to C&WNE’s total of $650 million in commercial real estate sales in 2002, making it the region’s leading investment sales operation for the year. But while the firm also traded such top Boston office assets as 101 Arch St. and Lafayette Corporate Center, Griffith Loeber said few property types have generated as much interest as the multifamily sector. The Longwood Towers, for example, had 25 serious offers, while there were a dozen bids for the Malden apartments.
“Multifamily is extremely hot,” Griffith Loeber said. “We think the market is going to react very strongly.”
If the $800 million mark is attained for the Capital portfolio, that would equate to a per-unit sales price of just over $142,000, certainly a healthy figure compared to other recent deals in the region. Gardencrest in Waltham sold for about $122,000 per unit when a New York real estate investment trust bought that older apartment complex last year, while Hub development icon Thomas J. Flatley traded his New England apartment portfolio for $115,000 per unit last summer. In that deal, a Denver real estate investment trust paid $500 million for the Flatley holdings, which totaled just over 4,200 apartments.
As with Griffith Loeber, multifamily investment specialist Jonathan Close said he expects the apartment market will remain solid in the coming months. Not only is the office market becoming increasingly unpopular among safety minded capital, the perceived roadblocks to new apartment development is well recognized by the finance community, Close said.
“Even with a good number of units in the pipeline, this is still going to be a supply-constrained market,” Close said. “The stars all have to be aligned right for a project to be successfully permitted, so a lot of those will never get built.”
Joe Clements can be reached at jclements@thewarrengroup.com.
