(To read more on the multifamily market, click here.)
FEDERAL WAY, WA-A 750-unit apartment development here that sold for $49 million in June 2004 sold again this month for $82 million. The one common denominator in both the new and old ownership is Bascom Northwest, the apartment investment division of Bascom Group, an Irvine, CA-based private equity firm.
The asset, now called Club Palisades, is approximately 93% leased. In 2004, Bascom and then equity partner Lehman Brothers acquired it as Waterstone from Equity Residential. In this latest transaction, that partnership sold the property to a new partnership that includes Bascom Northwest, Rock Point Group (equity) and Massachusetts Mutual Life (debt).
In explaining the recap, Bascom Northwest's director of acquisitions Court Durling says, "Lehman typically has a little shorter hold than we do." In explaining the $30-million increase in value, he says "When we tied it up in late 2003, Seattle was really down. That market has really done an about face since then."
Located at 2211 S Star Lake Rd., the complex was built in two phases, 1987 and 1990. Amenities include three pools (one indoor), two spas, a fitness center, an Internet café, a 50-seat theater, a billiards room and three clubhouse facilities. The unit mix is 50% one-bedroom units, and 32% two-bedroom units, and 17% 3-bedroom units. HSC Management has been retained to manage the property.
Durling says the new partnership will significantly upgrade and rebrand the 250-unit second phase, which sits above the first phase, into more of a luxury product. "There's only one other luxury product in the area and it's in an inferior location," Durling says. "We think there's a $200 to $300 (per unit, per month) delta."
The 2007 purchase price for Club Palisades equates to approximately $109,000 per unit, which is on par with the most recent comparable transaction in Federal Way. In late 2006, the multifamily division of Beverly Hills, CA-based Kennedy Wilson and its equity partner AIG Global Real Estate acquired Stonehaven at West Campus, a 518-unit, 493,854-sf apartment community built in 1991, for $58 million or 112,000 per unit.
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