ATLANTA-Waterton Residential, a Chicago-based multi-family company focusing on the acquisition and management of apartment buildings throughout the US, has purchased Uptown Square, a 363-unit apartment complex in Atlanta.

Originally developed by a joint venture between the Atlanta-based Lane Company, which owns and manages apartment developments, and the Dawson Company, an Atlanta apartment developer, the two were unable to refinance their construction loan after they finished the project, thereby falling into a maturity default.

At the end of 2009, Waterton purchased the note from the lender, Birmingham, Alabama-based Regions Bank and then, more recently, negotiated a friendly foreclosure with the developers. The original note was for $33.5 million, says Max Peek, vice president of acquisitions at Waterton.

The Dawson Company is still a partner in the Uptown Square development, says Peek. “In exchange for Lane and Dawson giving us title to the property, we were able to take them off the hook for some of their personal guarantees for the loan and give them a portion of the profits,” he says. At closing, Deutsche Bank Berkshire Mortgage assisted Waterton in placing a new Freddie Mac capital markets execution loan on the property, says Peek.

Uptown Square was only one component of the redevelopment of the area, envisioned over 10 years ago. It is part of the Lindbergh City Center. In 1999, Governor Roy Barnes and the Bellsouth Corporation announced that Bellsouth would anchor a planned 47-acre transit-oriented development around a new MARTA (Metropolitan Atlanta Rapid Transit Authority) station, which was to include office, retail, hotels, condominiums and rental apartments. The first phase of the Lindbergh master plan included the Uptown Square Apartments.

“There is a lot of high density zoning in the Lindbergh area,” says Peek, which is part of the larger, Buckhead submarket. It was underdeveloped until 2004, he says.

Uptown Square, which began construction in 2005, was completed in 2006 and the current occupancy is over 90%, says Peek. In addition to the apartments, it has 9,000 square feet of retail, including an art studio, a coffee shop and a hair salon. Waterton has plans to renovate the property. Included in the renovation will be the reconfiguration of the main lobby and leasing office and upgrades of the residential common area hallways, such as the installation of new lighting, carpeting and ceramic tiles.

Peek says that his company is interested in acquisitions throughout the US. “We are looking for more of these types of opportunities,” he says, alluding to the Uptown Square deal. “Our strategy, which is relatively new, is to buy distressed debt with the intention of gaining title to the properties.”

While Waterton is searching all over the US for new apartment investment, its main focus today is on Florida, New York, Texas, Phoenix and California, says Peek. “Those are the hot button markets with distressed debt,” he says. In these locations, there has been a lot of development and subsequently, a fairly large decline in property values.