Essex Apartment Fund Adds 907 Units for $130M

PALO ALTO, CA-Essex Property Trust’s Apartment Value Fund II has added 907 units to its portfolio. The fund paid $130 million for three multifamily properties, two in the Bay Area and a third in Southern California. In conjunction with the acquisition, the fund originated three new loans totaling $76.6 million that mature at the end of 2013 and carry a fixed interest rate of 4.89%.The two Bay Area properties are the 400-unit Harbor Cove in Foster City and Carlmont Woods, a 195-unit property in Belmont. The third property, Parcwood Apartments, is a 312-unit apartment community located in Southern California city of Corona. Overlooking a lagoon, Harbor Cove was developed in 1971 and is comprised of 12 three-story buildings. The unit mix is 283 one-bedroom, one-bath units (500-780 sf). Carlmont Woods, also developed in 1971, is a three-story structure offering 110 studios (500-560 sf) and 85 one-bedroom, one-bath units (660 sf).Parcwood was developed in 1989. The low-rise community includes 52 studios (550 sf), 132 one-bedroom, one-bath units (750 sf), 88 two-bedroom, two-bath units (1,050 sf) and 40 three-bedroom, two-bath units (1,250 sf). Last month, Essex sold the second tranche of properties from its inaugural Essex Apartment Value Fund to United Dominion Realty Trust, which is under contract to acquire the entire 4,646-unit portfolio for $756 million. The second tranche, which included seven California properties with a combined 1,904 units, sold for $322 million. Essex is a 1% general partner and 20.4% limited partner in the fund. Essex hired Credit Suisse First Boston “to evaluate strategic alternatives” for its inaugural fund this summer and began the liquidation last month, the same month it held the final closing for Essex Apartment Value Fund II, which will have an investment capacity of about $750 million. Essex has a 28% interest in Fund II.Seven of the nine Fund I investors, including Essex, are participating in Fund II. The objective of Fund II is to add value by identifying and acquiring assets in West Coast markets with high rental growth potential and then using Essex’s development, redevelopment and asset management capabilities to add value.Fund II will potentially invest in multifamily properties up and down the West Coast, but there will be an emphasis on investment opportunities in Seattle and the San Francisco Bay Area, markets many believe have hit bottom and are primed for recovery. Subject to specific exceptions, Fund II will be Essex’s exclusive investment vehicle for new investments until Oct. 31, 2006, or until the committed capital has been invested or committed for investments, whichever occurs first.Consistent with Fund I, Essex will be compensated for its asset management, property management, development and redevelopment services and may receive incentive payments if Fund II exceeds certain financial return benchmarks.