AREA Property Partners Acquires $215M Apartment Loan Portfolio

AREA Property Partners, in a joint venture with McDowell Properties, has acquired a portfolio of defaulted loans valued at $215 million, secured by 17 apartment properties encompassing an aggregate 4,733 residences.

September 19, 2011
By Barbra Murray, Contributing Editor

AREA Property Partners, in a joint venture with McDowell Properties, has acquired a portfolio of defaulted loans valued at $215 million. AREA purchased the loans, which are secured by 17 apartment properties encompassing an aggregate 4,733 residences, at a 40 percent discount.

The multifamily assets that serve as collateral for the various loans span four states, with the majority located in Texas. The Lone Star State is home to 10 of the properties: Seven are in Austin and three in Dallas. Three apartment communities are sited in Tulsa, Okla.; two are in Phoenix; and the remaining two properties are in Tampa and Jacksonville, Fla.

With an overall occupancy rate of 84 percent, the portfolio offers a window for lease-up at increasing rental rates as the national apartment market continues to tighten, and AREA and McDowell plan to capitalize on that opportunity by repositioning the apartment properties through sweeping exterior and interior upgrades. “These assets will be able to compete with newer complexes in their submarkets while offering a much stronger value within their rent levels,” Steve Wolf, a partner with AREA, said. The team will also implement its asset management expertise to further bolster the desirability of the apartment destinations.

Acting in conjunction with joint venture partners, AREA has been quite busy snapping up commercial real estate portfolios and individual assets lately. Earlier this month, the international real estate investor and fund manager completed the first phase of the $350 million purchase by AP AG Portfolio L.L.C., a joint venture involving AREA and Adler Group, of Washington Real Estate Investment Trust’s 3.1 million-square-foot Washington, D.C.-area industrial portfolio. The news was immediately followed by AREA’s announcement that it had acquired a 422-unit, value-add apartment portfolio in San Francisco for $59.6 million.

AREA’s activities over the summer, however, have not centered solely on its shopping spree. In July, the company pocketed $149.5 million on the disposition of Washington, D.C.’s Capitol Plaza, a 291,800-square-foot office building that serves as a prime example of how AREA can work its magic to transform and add value to an asset. The company had partnered with Van Ness Property Group on the 2007 acquisition of what was then a vacant building. Four years later, after implementing an aggressive leasing program, AREA boosted the property’s occupancy level up to 97.6 percent with a tenant roster of such creditworthy tenants as the U.S. Department of Homeland Security and the U.S. Internal Revenue Service.

*This story was updated September 19, 2011 at 4:53 p.m. EST.