B and C Apartment Properties Gaining Popularity

NEW YORK CITY-A recent refinancing of a $181-million B and C class apartment portfolio may point to an incoming real estate trend toward investing in less glamorous, more stable properties. While such assets may lack the growth potential and high rents of class A properties, they appear to represent safe havens to investors navigating today’s choppy economic waters.

According to officials at Grubb & Ellis Co. who arranged the $29 million loan to refinance 24 apartment communities owned and operated by Fifteen Group of Miami, a stable tenant base and less downside risk are attracting buyers to similar B and C buildings. The Fifteen Group portfolio includes 6,868 apartments located in major metro markets including Atlanta, Dallas, Houston, Miami, San Francisco, Sacramento, Tampa and Birmingham.

“What we are seeing is that in times of economic volatility, like we are experiencing now, B and C apartment properties may prove to be a more stable investment,” says G&E senior vice president Herb Chase, brokered the deal along with fellow senior vice presidents Curtis Palmer and John Brown. The lender was Philadelphia-based investment fund CMS, which replaced the equity and mezzanine capital of Credit Suisse First Boston.