BREMERTON, WA-Morrison Street Fund I LP, an investment fund of Portland, OR-based NBS Real Estate Capital is purchasing the 116-unit Wellsley Apts. here for $7.8 million. The property is located at 3232 Pine Road, just west of Wheaton Way. Fund manager Rance Gregory tells GlobeSt.com the deal is a prime example of the kind of creative solutions the fund can provide certain sellers. Specifically, Gregory says the Wellsley Apartments was an off-market transaction where an individual investor had a nice apartment complex that he was not quite ready to sell because he was concerned about the gain. “So this is a structured transaction where we formed a new entity with the owner and will keep him involved for a certain amount of time in order for him to defer some of the gain and then will eventually take him out of it completely,” says Gregory. “It’s kind of like an installment sale; it helps him not pay all of his gain up front.”The historical occupancy for the Wellsley Apartments is 92%. Over the last five years, the owner has not provided any concessions and vacancy has fluctuated between 99% and 93%. Gregory says the property is located near a hospital, an Alzheimer’s retirement facility and a large independent senior living development, which together have created a cluster of atypical renters in the area such as retired military people who want to be in close proximity to both friends and the hospital.Gregory says the fund was going to assume the mortgage on the property, “but we got to a place where paying the prepayment penalty was worthwhile to gain access to more of a market-rate loan earlier.” The in-place capitalization rate on the investment is 8.2%, he says. “We want people to bring us deals that take some thought,” says Gregory. “We won’t be the guy out there bidding on everything but we can get creative.”In January, the fund provided about $3.5 million in bridge financing for the purchaser of a 14,000-sf retail center tucked between two larger retail developments in Burlington, WA. “The buyer had a short time fuse because the developer wanted him to close but the existing loan was personal recourse that nobody wanted to assume,” says Gregory. So Morrison Street Funds put up the money to pay off the recourse loan and, along with the buyer, put up additional cash to get up to the $5.3-million purchase price. Home Street Bank will now go out and put a new loan on it that will pay back and bridge portion, the fund will keep up to $1 million in the deal as preferred equity and the buyer will keep in an additional $1.2 million. The fund had its first closing in October 2003 and worked its way up to $26 million in equity. It closed its first deal one year ago. The value of assets now in the fund’s portfolio now total about $75 million, for which Morrison Street Fund has provided $11.1 million of equity. Gregory says the fund will spend the rest of its equity in 2005, approximately $15 million, with the hope that it translates similarly into $75 million of real estate. The typical holding period for assets in the fund is three- to seven years.