Lembi Group Acquires Four Apartment Properties

SAN FRANCISCO-The Lembi Group has added to its apartment portfolio here with the acquisition of four older apartment properties totaling 187 units for about $30 million. The locally based investor now owns about 3,400 units in the Bay Area.The acquired properties are located at 940-942 Hayes St. (40 units), 990 Fulton St. (35 units), 1155 Jones St. (60 units) and 500 Larkin St. (52 units). Lembi Group financed 92% of the purchase price with acquisition and mezzanine financing through Citigroup Global Markets Inc. The two-year financing was arranged by Holiday Fenoglio Fowler director Mitch Paskover. “[The] loan was difficult to achieve due to the low initial cap rate of 5.17%,” says Paskover. “In response, HFF structured a mezzanine loan with a lower initial pay rate and the remaining interest accrued.” Paskover describes the sellers as “a couple of mom-and-pops” and says the acquisition by Lembi is a value-add play. “It fits in well with their business plan of buying apartments that have upside through increasing rents,” says Paskover. “They are a long-term holder; they can sit around and wait for tenants to leave and then raise the rents to market. Once the value-add is done, the borrower will pay off this loan and obtain a permanent loan.”Lembi Group is comprised of 40 entities that own, manage and operate 250,000 sf of office space and five hotels in addition to its multifamily portfolio. Last September, Paskover worked with the Lembi Group to arrange a $56.5 million refinancing through US Bancorp for a 17 building, 431-unit multifamily portfolio in the Nob Hill/Russian Hill and Tenderloin submarket of San Francisco.