May 16, 2016

History is made with $87.5M South Portland apartment complex sale

COURTESY / CBRE|The Boulos Company
COURTESY / CBRE|The Boulos Company
The Liberty Commons and Redbank Village apartment complexes in South Portland have been sold for $87.5 million to Jones Street Investment Partners of Hingham, Mass.

SOUTH PORTLAND — CBRE|The Boulos Co. made Maine history when, along with Boston-based CBRE|New England, the commercial real estate firm orchestrated the sale of a 620-unit apartment portfolio for $87.5 million to a Massachusetts investor.

It was the largest sale in its class. The previous high was in December, when 309 units in Portland and Scarborough sold for $50.2 million, also to a Massachusetts investor. CBRE|The Boulos Co. brokered that deal as well.

In the recent deal, which closed May 5, Jones Street Investment Partners of Hingham, Mass., bought adjacent apartment complexes in South Portland from Dallas-based Lone Star Funds, a private equity firm.

CBRE|New England and CBRE|The Boulos Co. represented both the buyer and seller. Joe Porta, a partner at CBRE|The Boulos Co., was the Maine-based man on the ground — and was also the Maine-based lead on the December sale.

The two complexes, which serve middle-income tenants, are Redbank Village and neighboring Liberty Commons. The sheer size of the properties, along with the dollar value, helped make this a unique sale, said Porta.

Redbank Village, which dates to the mid-1940s and is at 62 MacArthur Circle East on 58 acres, offers 2.5 million square feet of living space in the form of 500 apartments configured in a variety of ways, from ranch-style to two-family duplexes, ranging from one to three bedrooms. Amenities include hardwood flooring, individual HVAC systems, basements with laundry, private outdoor space, and a freestanding community center that is home to Roots & Fruits Preschool and Day Care. Most of the apartments have been upgraded with partial kitchen and bathroom renovations dating back to 2000.

Next door, Liberty Commons, at 4 Liberty Lane on 8.6 acres, is comprised of six 3-story residential buildings constructed between 2005 and 2006. The buildings offer 375,487 square feet of living space in the form of 120 apartments, in a mix of one to three bedrooms. Amenities include access to Redbank Village's clubhouse and two detached five-car garages.

The properties are surrounded by other multi-family housing communities and have great access to major retail and dining amenities, including the Maine Mall.

Last year, Lone Star paid $7.6 billion for Rochester, N.Y.-based Home Properties, a real estate investment trust with 41,917 apartments in 121 communities.

Redbank and Liberty were part of that portfolio, but didn't fit into Lone Star's long-term plans, Porta said.

Because Greater Portland doesn't regularly see huge surges in rent, the assets would be more about buying and holding in order to make a profit.

"They kept some holdings of the original portfolio acquired from Home Properties, but this is a small asset for Lone Star, and it was not a clean fit in their extensive multi-family portfolio," Porta said.

Enter Jones Street Investment Partners, which was founded in 2014 and focuses on institutional multifamily assets in the Northeast. The sale doubled the size of the firm's portfolio, to more than 1,200 apartments. The price they paid is on par with properties of this scale in the area, said Porta.

"Like a lot of institutional funds, they're aggressively looking for a stable return with upside," said Porta. "The markets are so efficient right now, especially in this asset class, that everyone is chasing the same return. So people are paying for a little bit of the upside that they're expecting."

That upside is about the perceived safety of apartment rents in combination with inexpensive long-term debt. The majority of rents are at or below-market, giving apartment complex owners opportunity with future lease renewals, said Porta. In the case of Redbank and Liberty, which have maintained a high rate of occupancy since 2012, both are currently achieving modest increases on renewals, he said.

Although Maine's size and population puts it in the tertiary market, overall real estate revenue in southern Maine is doing better than that — acting like a secondary market, said Porta.

"Part of it is supply and demand for investment property. And part of it stems from the symptoms Greater Portland is showing, performing well in the multi-family space," he said. "There's strong demand for all multi-family rentals in Greater Portland right now, but we do not exactly have a huge boom in the year-round population, so the other part of it is a shift in where people are choosing to live and the inventory that is available to them."

Read more

Downtown Portland apartment complex sells for $7.3M


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