KBS Legacy Partners Acquires 255-Unit Multi-Family Property Outside Baltimore for $65M

KBS Legacy Partners Apartment REIT has just completed the purchase of the 255-unit The Residence at Waterstone in Pikesville, Md., taking it off the hands of Avalon Village Green Associates for $64.7 million.

By Barbra Murray, Contributing Editor

KBS Legacy Partners Apartment REIT has just completed the third purchase in the fund’s history, snapping up the 255-unit The Residence at Waterstone in Pikesville, Md. The REIT, a joint venture sponsored by KBS Capital Advisors L.L.C. and Legacy Partners Residential Realty L.L.C., purchased the luxury suburban Baltimore complex from Avalon Village Green Associates L.L.C. for $64.7 million, excluding closing costs.

KBS Legacy, which launched two years ago, did not lose any sleep over the price tag. “We believe our purchase price was approximately 85 percent of replacement cost,” W. Dean Henry, president of Legacy Partners Residential, told Commercial Property Executive. KBS Legacy financed the acquisition with proceeds from its ongoing initial public offering and a $47.9 million Freddie Mac loan carrying an interest rate of 3.79 percent for a seven-year period.

Waterstone is not in the middle of a core market, but it’s practically right next door to one. The apartment community sits 13 miles outside of downtown Baltimore, providing a neighborhood environment within easy reach of the bustling city streets. Part of the suburban feel comes from the property’s sprawling 25-acre site, which encompasses 29 two- and three-story townhome-style structures that were originally designed as luxury condominiums in 2002. Presently, Waterstone is 96 percent occupied.

The Waterstone purchase comes just two months after KBS Legacy picked up the 196-unit Poplar Creek, a 95-percent leased apartment community in a prominent Chicago suburb, for $27.2 million. And there’s more to come from the REIT. “We have identified approximately 25 markets in which we would like to purchase existing assets,” Henry said. “For the most part, these markets are in the ‘smile states’ from the Northeast, Southeast and across the South, Southwest and West Coast. We’ve identified these target markets, as well as the Chicago metropolitan area, on the basis of past and future job growth, education levels, and population.”

KBS Legacy is not alone. There is a growing and increasingly active crowd of investment entities that have a seemingly insatiable appetite for apartment assets. As Henry pointed out, “Apartment sales in the last quarter of 2011 were at the highest volume since 2007.” According to a report by Marcus & Millichap Real Estate Investment Services, sales in 2011 approached $57 billion, marking a 27 percent increase over 2010.

“There is no question that a good part of this activity is influenced by the demographics and supply/demand that favors apartments, and another factor is the approximate $400 billion of apartment debt coming due within the next several years,” he added. “Overall, it is a great time to be buying apartments.”