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Broadstone Affiliate Buys 2 Baltimore Multifamily Buildings In $137.5M Transaction

1901 South Charles St. in South Baltimore

A Rochester, New York-based REIT has bought into the Baltimore multifamily market.

Broadtree Residential, an investment vehicle managed by Broadstone Real Estate, closed on the purchase of three Class-A multifamily buildings for a total of $137.5M. Two of the buildings, all sold by affiliates of Chesapeake Realty Partners, are across the street from one another in South Baltimore and the other is near Harrisburg, Pennsylvania.

1901 South Charles and 2 East Wells are both new-construction, mid-rise apartment buildings that were developed by Chesapeake to LEED Gold environmental standards and sit on opposite sides of Wells Street. The four-story 1901 South Charles was finished in 2012 with 193 units surrounding a courtyard. Two East Wells sits one story taller, contains 152 units also surrounding a courtyard and was completed in 2015, with two restaurants on the ground floor. Both properties contain enclosed parking structures.

The Overlook, in the Harrisburg suburb of of Camp Hill, was built in 2014 and contains 288 units split between six buildings, bringing the transaction to a total of 633 units and the two commercial spaces at 2 East Wells. Chesapeake received shares in Broadtree Residential's operating partnership in lieu of cash for the purpose of deferring capital gains taxes in what is called an umbrella partnership real estate investment trust, or UPREIT, transaction.

In exchange for transferring the properties to Broadtree, Chesapeake received more than $25M in equity in the company's portfolio, which is now estimated to be worth $350M. Though the shares are not direct investments in Broadtree, their value is exactly the same as Broadtree's. If they were to be converted to shares in Broadtree outright, the capital gains taxes from the transactions would then be due just as it would if Chesapeake sold its shares in the partnership.

“This transformational transaction is the first of what we hope will be many UPREIT deals for Broadtree,” Broadtree CEO Chris Czarnecki said in a statement. “Broadtree operates in a competitive multifamily marketplace, and one of the ways to create shareholder value is via the sourcing and execution of complex UPREIT transactions. This portfolio acquisition also provides [Broadtree] shareholders important geographic diversification, and enhances our portfolio with additional stabilized assets that we plan to hold for the long term."