Foulger-Pratt JV Buys 963 Northern Virginia Apartments In Major Value-Add Play
Investor demand for suburban workforce housing has remained strong throughout the coronavirus pandemic, with the latest deal closing for nearly 1,000 units in Northern Virginia.
The parties declined to disclose the sale price. But a comparable deal, the July sale of the Potomac Vista apartments in Woodbridge, traded for $200K/unit, a price that would put this latest sale over the $150M mark.
The properties, the Dale Forest and Brightwood Forest apartments, are made up of three-story, garden-style buildings. The Hylton Group, a Virginia-based homebuilder founded in 1947, built the communities in five phases between 1976 and 1988.
Foulger-Pratt Vice President of Acquisitions Joe Clauser said the partnership was drawn to the assets because they are affordable, workforce housing with an opportunity to increase rents by upgrading the properties.
"The rents are by far the lowest rents that exist in the Woodbridge submarket by many hundreds of dollars," Clauser said. "We saw an opportunity to go in and add value by bringing in more of an institutional management, push rents to market through unit renovations and adding common area amenities."
The amenities the buyers plan to add include a clubroom, a fitness center, playgrounds, grills and outdoor seating areas.
The deal represents the first Northern Virginia acquisition for Bridge Investment Group, a Salt Lake City-based investor that owns over 40,000 apartments nationwide. Bridge Deputy Chief Investment Officer Colin Apple said the company typically invests in affordable workforce properties and manages them itself, so it wanted to find an asset large enough to make it cost-effective to hire a new property manager.
"The scale was attractive for us to be entering that market," Apple said. "This will really enable us to effectively manage the asset, given the number of units."
Ideal Realty Group founder Allen Manesh, whose team represented both sides in the off-market transaction, said many investors in the market have been looking for this type of workforce housing acquisition in the suburbs.
"This kind of vintage and that many units, there's always buyers for it," Manesh said. "There's a huge interest on what we call a bread-and-butter type of deal where it's very affordable. Investors like to invest in properties that people can afford. It feels safe."
A six-person company based in Gaithersburg, Ideal Realty Group has brokered the sales of two other Northern Virginia apartment properties this year: the $40M sale of the Berkdale Apartments and the $51M sale of the Mark at Dulles Station.
Financing for multifamily acquisitions has remained available this year despite the economic turmoil, as debt providers see it as a safer asset class than other sectors like hospitality and retail, Manesh said.
"Multifamily is a great investment because everybody needs a roof over their head," Manesh said. "When you talk about multifamily, there's still plenty of financing. The financing is driving the deals. The rates are low so it's very attractive."
Clauser said the agencies, Fannie Mae and Freddie Mac, have been providing the best financing terms this year.
"What we're seeing is the agencies are definitely the prevailing lenders providing the most attractive financing for these types of acquisitions," Clauser said. "We also explored life companies, banks and debt fund executions. Among those options we had a number of strong quotes, but ultimately determined the agency execution fit the venture the best."
Berkadia Director Jonathan Pratt, who brokered the acquisition financing along with his colleague, Rossana Bouchaya, also said the agencies have been providing attractive debt terms.
"While the multifamily debt markets are very fragmented right now, Freddie Mac has been a great business partner for us and stepped up and saw the vision of this transaction and helped us structure debt to meet the client's business plan," Pratt said.
Foulger-Pratt and Bridge both remain active in the market looking for more workforce housing properties to buy, Clauser and Apple said.
"There's a real shortage in the D.C. area of quality workforce housing," Clauser said. "So we really see an unbelievable demand for this type of product and the ability to do smart, value-add additions to the property to capture really attractive incremental rent increases relative to the capital we're spending."