BPG Properties Takes $260M Boston Capital Portfolio

Philadelphia-based BPG Properties Ltd. has taken a big chunk out of its $850 million private equity fund to pay for the $260 million acquisition of Boston Capital Real Estate Trust and the 11 apartment communities in the REIT’s portfolio.As reported Oct. 24 by CPN, shares of the publicly-traded REIT were valued at $13.30 each in the all-cash transaction, which closed Tuesday. Boston Capital REIT was a division of Boston Capital Corp., a real estate investment and advisory firm, and focused solely on apartment communities. The deal gives BPG 11 multi-family properties with a total of 3,098 units in the Seattle, Portland, Salt Lake City, Dallas and Jacksonville, Fla., markets. The purchase was made by BPG Investment Partnership VIII & VIIIA, L.P., a fully discretionary private equity fund with total equity commitments of $850 million. CPN reported Sept. 10 that the fund had closed and was BPG’s largest fund to date.The Boston Capital REIT is BPG’s second largest acquisition since it bought a 22-apartment community portfolio in Pennsylvania for $314 million a year ago from National Properties Inc. BPG’s multi-family operating arm, Madison Apartment Group, L.P., will manage the apartment complexes. Since it was formed in 2001, Madison’s holdings have increased to approximately 25,000 units in 22 states.“The employment and population growth in those areas is very strong, particularly in the Portland and Seattle areas,” Arthur Pasquarella, executive vice president & COO, told CPN today. “It’s really hard and very costly to put new product in the market. We feel very certain there’s a pretty high barrier to entry. It should be a prolonged landlord’s market out in those areas.”Pasquarella said BPG, which owns 110 apartment communities, first started seeing and uptick in vacancy and rental growth about 18 months ago as the housing market slowdown got under way and got steadily worse.BPG and Madison officials said the portfolio was attractive because most of the units are in fast-growing Western U.S. communities like Seattle, Portland and Salt Lake City and are at least 95 percent occupied.“This acquisition presented Madison with an opportunity to enter desirable Western markets and expand our holdings in Texas and Florida,” Madison president Joseph Mullen said in a release. “We believe our vertically integrated management and operations approach, along with our experience in acquiring and operating large multi-family portfolios will benefit all of the communities within this portfolio.” BPG, which often buys value-added properties, plans to immediately begin a $15.5 million capital program to make physical and operational upgrades throughout the portfolio. That works out to about $5,000 per unit, Pasquarella noted, adding that some complexes need more work than others. Flush with money from the $850 million fund, BPG has been busy the last few months with deals across a variety of commercial real estate sectors. BPG has a portfolio of more than 20 million square feet of office, retail, student housing and industrial properties as well as the multi-family holdings.Pasquarella said the company’s goal is generally to put one-third of its fund in multifamily, a third in office and the remainder in a mix of retail and industrial. “As opportunities present themselves, they ebb and flow. But for the last five years, our goal has been to do exactly that kind of combination.”Asked how much remained in the $850 million fund, Pasquarella said, “We are about a third funded already in terms of our actual acquisitions.”Last week, BPG acquired Willowcyck Apartments, a 308-garden-style apartment complex in Upper Gwyedd, Penn., with money from the $850 million fund. The price was not released but BPG said it planned to put about $4.3 million in upgrades into the property that is 91 percent occupied. Early last month, BPG paid $80 million from the fund for Grand Oak Business Park, a 10-building office park in suburban Minneapolis. In the fall, BPG made other office deals, including the acquisition of a 200,000- square-foot office building at 18 Tremont St. in Boston for $49 million from Meritage Properties. It also bought Park Plaza Center, a 600,000-square-foot complex in San Jose with office as well as retail and restaurant space, for $169.5 million from a partnership of Divco West and RREEF.