Stamford, CT GE Real Estate FirstWorthing Corp
Greg Bates, managing director and head of the direct investments group, tells Multi Housing Forum that GE initially started talks with the sellers, FirstWorthing and Principal Financial Corp., about a potential opportunity to do a deal. A few months ago, the sellers tapped Malcolm McComb, vice chairman of CB Richard Ellis' Atlanta office, to market their student living and conventional holdings. After evaluating both opportunities, GE decided to pursue the conventional assets, which comprised about one-third of the overall portfolio.
Six of the assets are in Dallas, three are in the Greater Atlanta market and one is in Austin. They range from brand-new A product, which primarily includes FirstWorthing's Cityville assets that are high-quality yet affordable properties with many amenities built on the edge of prime locations that typically cater to young professionals, to C-quality product. "We actually like that diversity, as well as the geographic diversity, of the portfolio," Bates says.
Three basic factors played into GE's decision to pursue the assets, the executive states. "There is a value creation element to almost all of the deals," he says. "We particularly like the Cityville concept, which we think is increasingly going to be in the path of growth in Dallas. We think the three Cityville assets there are going to be well positioned over the next few years to capture a lot of growth and echo boomer demand because they're really targeted to a younger, hipper demographic."
In Austin and Atlanta, there's opportunity to create value through physical improvements. "We can actually go in and control what's done at the assets," says Bates. "So we think that by putting money into these assets, repositioning them and aggressively leasing them up, we can position them a little more competitively in the marketplace."
The rest of the assets, he says, "are simply in high-growth markets where we think NOI growth will outperform some of the other markets we've evaluated. We feel pretty comfortable that Dallas will continue to grow and our assets will be well positioned there. And similarly, we think Atlanta and Austin provide either rehab or high-growth opportunities."
According to GlobeSt.com, the communities involved in the deal are: the 223-unit Worthing Ridge at 1817 E. Oltorf St. in Austin; the 533-unit Peachtree at 710 NE Peachtree St. in Midtown Atlanta; the 378-unit Worthing Crest at 3200 Spring Hill Pkwy. in Smyrna, GA and the 360-unit Worthing Creek at 2700 Summit Creek Dr. in Stone Mountain, GA. In Dallas, the Cityville assets are the 226-unit 2819 N. Fitzhugh Ave., the 238-unit 1333 N. Peak and the 128-unit 1811 Greenville Ave. Also in the Dallas area are three other properties--the 324-unit Worthing Bend at 3701 W. Pioneer Dr. in Irving; the 622-unit Worthing Pointe at 1319 Cavalier in Richardson and the 500-unit Spring Creek at 5501 Naaman Forest Blvd. in Garland.
GE has tapped Greystar Management to oversee the properties in Texas, while First Communities Realty Inc. will manage the Atlanta communities. GE intends to hold the communities on its balance sheet. In all, the firm expects to spend approximately $10 million on improvements to the assets, which have an average occupancy of around 75%. Bates hopes to bring that figure up to the high-80% range by the end of its hold period, which is about three to five years. As for other purchases within its Direct Investments Group, the company is targeting unleveraged returns of between 7.5% and 8% on this deal.
By year's-end, the direct investments group intends to acquire up to $4 billion worth of properties. Since its creation in September 2006, it has racked up $1.6 million in deals, about $600 million of which have been comprised of multifamily transactions, including the 3,1400 units it picked up as a result of the $2-billion purchase of Crow Holdings' mixed-use portfolio last year. Bates relates that when all is said and done, the percentage of the group's total purchases should be evenly split between apartments, office, retail and industrial properties.
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