DeBartolo, Elco Landmark Acquire 542-Unit Luxury Multi-Family Development in Florida

DeBartolo Development and Elco Landmark Residential have joined forces on the acquisition of a 542-residence apartment complex in Palm Beach Gardens, Fla.

By Barbra Murray, Contributing Editor

DeBartolo Development and Elco Landmark Residential have joined forces on the acquisition of a 542-residence apartment complex in Palm Beach Gardens, Fla. The partners have rebranded the luxury property, formerly known as Union Square, giving it the new name of Landmark at Garden Square.

Formerly owned by Ceebraid-Signal Corp., the newly renamed Garden Square was picked up for a price that DeBartolo and Elco are not disclosing publicly. In 2005, lender GACC sold Ceebraid-Signal’s $58 million mortgage on the asset to Citigroup Commercial Mortgage. At that time, the property carried an appraised value of $72.5 million and the loan was due to mature in November 2010. According to various news reports, the property was set for foreclosure.

Regardless of any financial baggage that may have been attached to Garden Square, the property is thriving today. The four-decade-old multi-family community, which encompasses 51 two-story buildings, benefited from a substantial $23 million renovation program that reached completion in 2008. Additionally, DeBartolo and Elco will continue the improvement process over the next six months, thereby increasing Garden Square’s appeal in a market that is thirsty for luxury rental accommodations. The residential complex presently boasts an occupancy level of 92 percent, which is reflective of the current rental climate in Palm Beach.

“More and more people have gravitated toward renting,” Avery Klann, principal with Apartment Realty Advisors, told Commercial Property Executive. “Would-be homebuyers are seeking luxury apartments, but we’ve been seeing demand across the board in both Class A and B properties.” As per a report by ARA, the vacancy rate in Palm Beach continues to tumble and is expected to drop further until reaching a plateau in the mid-5 percent range in 2014-15.

Investors are, unsurprisingly, keen on the Palm Beach apartment scene. “Due to the low-interest-rate environment and the fact that we haven’t seen a lot of development take place here in the last four or five years, it’s a perfect storm for multi-family investors,” Klann said.

Prime investment conditions are hardly limited to Palm Beach. DeBartolo and Elco have been quite active in other locations of late. In January, the two teamed up to acquire the 384-unit former Sunshadow Apartments in Casselberry Fla., and during the same month, DeBartolo announced it had received certificates of occupancy for the $39 million first phase of Andros Isles Apartments, a 360-unit luxury multifamily project in Dayton, Fla.

On a national level as well, buyers can’t seem to get enough of the apartment market. Last fall, Elco commenced the multi-phase closing of the $338.5 million joint venture purchase of a 5,600-unit southeast multifamily portfolio from Colonial Properties Trust. Currently, such mega-portfolio deals do not happen every day, but they do happen. In January, UDR and MetLife, in the second phase of a two-part joint venture deal, completed the $630 million acquisition of five Manhattan apartment high-rises. Also during the first quarter of 2012, Pivotal Group Inc. wrapped up the partnership purchase of a 3,200-unit group of apartment properties in Texas, and Continental Realty bought a 1,200-residence portfolio in Louisville, Ky., for $97 million.

Alas, increased national sales volume is in the forecast for 2012. As noted in a report by Marcus & Millichap Real Estate Investment Services Inc., “Sellers will bring more properties to market, capitalizing on strong investor demand, easing bidding wars.”