Madison Trailways in Burnsville, MN, a town that has become a popular bedroom community for the Twin Cities.
MINNEAPOLIS—Equus Capital Partners, Ltd., a Philadelphia-based private equity fund manager, has just sold Madison Atrium and Madison Trailways in Burnsville, MN, a suburb just south of Minneapolis. San Francisco-based FPA Multifamily, LLC bought the 588-unit apartment portfolio for $72.5 million.
In some ways, the sale was a bit of a surprise, as Equus purchased the value-add portfolio just two years ago and had finished renovations on about half the units. But the demand for apartment properties in this booming region, which has one of the lowest unemployment rates in the nation, was so robust that Equus officials realized they could get a great return even though the renovations were not complete.
“We typically underwrite a five-year hold period,” Greg Curci, vice president of Equus, tells GlobeSt.com. But they also noticed that rental rates in the towns near Burnsville were increasing at a rapid clip, and residents had begun looking for other options. “We were in the draft of that.”
And as the company renovated units and signed new leases, “the premiums were higher than expected. Burnsville has become a very desirable bedroom community for the rest of the area.” Curci estimates that 115 residents commute to jobs in the vibrant downtowns of Minneapolis and St. Paul.
At the time of the sale the portfolio was 95% occupied. The portfolio was acquired in 2014 from Henderson Global Investors, now TIAA-CREF. Equus launched an upgrade of the 25-year old unit interiors and select amenity areas. The company had successfully renovated 320 units, or 55% of the overall total, before opting to market the properties for sale.
That move attracted investors from around the nation, Curci adds. “We had a number of choices in selecting a buyer at this price point. It was a deep bid sheet and the interest was widespread.” The eventual buyer got the nod because “they've got a stellar reputation in the market for closing deals.”
One aspect that made this particular portfolio so attractive was that Equus had proven just how much value an owner could add. “Almost every property on the market is pitched as value-add,” Curci says, “but in a lot of them, that value-add possibility is unproven or lightly proven.” But here, instead of just renovating a handful of units and then trying to sell, Equus “did more than 300. We definitely validated that someone would pay an extra $150 per month.”
The two communities sit just four miles from each other along I-35W, and tenants can reach both downtown Minneapolis and St. Paul in about 20 minutes. Madison Atrium is comprised of 348 units and was built in 1986, while Madison Trailways contains 240 units and was completed in 1988.
Equus was represented by Keith Collins and Abe Appert of CBRE.
The company's portfolio consists of more than 17 million square feet of office, retail, and industrial properties and over 10,000 apartment units across 46 communities located throughout the US. But Madison Atrium and Madison Trailways were its only properties in the Twin Cities, a region Curci loves due to its vibrant economy.
The company is very happy with this sale, he adds, but “to be out so quickly is bittersweet.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
