SEATTLE-Locally based Security Properties has closed its Security Properties Multifamily Fund, launched in June 2011. The fund acquired, both directly and through joint ventures, 2,471 apartment units located in the Seattle, Portland, the San Francisco Bay Area and Phoenix markets.
The total acquisition cost of the fund's 17 apartment properties was approximately $390 million. The fund included a diversified portfolio of moderately leveraged apartment properties offering attractive risk-adjusted returns to investors.
The acquired properties are enhanced with a balanced mix of investment strategies—including opportunistic, core-plus, and value-add strategies that renovate and reposition the investments. “This fund allowed private investors an opportunity to allocate capital—directly and alongside major institutional partners—to a sizeable portfolio of cash flow-generating apartment properties,” says Ed McGovern, managing director of capital markets at Security Properties.
“By leveraging our industry and capital relationships, the fund offered investors participation in a broader pool of larger properties which can be managed and marketed more efficiently,” he adds. McGovern says that Security Properties used the commitments in the fund to assemble a portfolio of existing apartment properties that generates attractive cash yields, benefits from favorable tax treatment and offers a hedge against future inflation.
“Rather than employ a cookie-cutter investment program, we look at the real estate assets on an individual basis, and decide which strategies and tactics will generate the best return on investment for a specific asset,” he says.
As GlobeSt.com reported earlier in the year, one of the fund's acquisitions was when Security Properties Inc. teamed with Real Estate Capital Partners to purchase Redwood Park apartments, a 156-unit apartment project in Santa Rosa, CA. The property was acquired by Security Properties through the firm's Security Properties multifamily fund for a purchase price of $24.5 million.
Security Properties also recently sold its first asset in the Security Properties Multifamily Fund, called Chelsea Heights, located in Tacoma, WA. The sale of the condo-to-apartment conversion project, purchased out of foreclosure, generated a highly attractive return to investors.
The close of Security Properties' fund comes at a time when many industry experts are pointing to apartments as one of the best-performing real estate product types. The Urban Land Institute, in cooperation with PricewaterhouseCoopers, said in a recently published report that “apartments should continue to outperform all other property types on a risk-adjusted basis, with excellent cash flow components.” The 2013 Emerging Trends in Real Estate study — part of an annual series of trends and forecast publications that reflect the views of leading real estate executives in three global regions—also expects apartment rents and project values to continue to rise in most markets, likely well into next year.
“We believe multifamily housing will continue to benefit from strong demographic and societal forces, particularly in major markets and their inner ring submarkets, with positive job creation driven by innovation, a diversity of goods and services, and connections to the global economy,” McGovern says. “We'll continue to pursue these opportunities to provide our investors with lower volatility cash flow-generating alternatives to stocks and bonds.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
