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Jan. 23, 2013

Matteson Acquires Washington Apartment Community

By Jeffrey Steele, Contributing Writer

Seattle—The Langara, a 134-unit rental property outside Seattle, has been acquired by The Matteson Companies. Matteson purchased the property from Polygon for $28.2 million, in a transaction announced in mid-January.

The community is one of seven West Coast apartment communities Matteson has bought or will buy over a 15-month period. Together, those communities represent more than $300 million worth of apartment assets.

The Langara, like the six other multifamily properties acquired by Matteson, was built within the last 10 years, and it features a variety of high-end features, including nine-foot ceilings, in-unit washers and dryers and updated amenities.

“Matteson Companies was attracted to the Langara investment because of the apartment market fundamentals on the east side of Seattle, where there is continued job formation and moderate supply,” John Bellack, principal at Matteson, tells MHN. “The property is well designed with higher-quality construction developed by Polygon.”

Among hurdles to be overcome was getting the deal done during a relatively short time frame. “We are in a 1031 exchange with limited time to acquire the property, and anticipated closing in 2012 required by the seller,” Bellack says. “We overcame the [challenges of the] very fast transaction timeline by accepting a seller carry back, or seller financing for a short period of time, while we arranged enclosed agencies.”

Bellack adds that the company’s investment strategy is focused upon properties built in the past 13 years, featuring at least 100 units and located in vibrant West Coast markets from Southern California to Seattle with strong employment drivers and demographic characteristics. The company has sought to acquire modern properties appealing to the growing renter segments, and that have lower ongoing capital requirements.
Matteson has capitalized on the low interest-rate environment by financing its acquisitions with 10-year fixed-rate loans in the high three percent range, with predominantly full-term interest only. The company has insisted on modest leverage, customarily around 60 percent. Matteson targets 5.5 percent or greater cash flow returns, enhanced by significant tax shelter from depreciation.

Because investments in multifamily properties are displaying compelling long-term performance characteristics, Matteson’s strategy is to take full advantage of the positive leverage available in the capital markets. With revenue appreciating and a fixed cost of the long-term debt, the returns become steadily more appealing over the years.

“The investment performance of our existing multifamily portfolio has been excellent,” says Matt Matteson, president, Matteson Realty Services. “We expect solid investment performance from these new investments over the long term.”

The Langara and its residents stand to benefit from Matteson’s ownership, Bellack adds. “It will now be in the hands of responsible long-term owners, who will manage and maintain the property to the highest standards,” he says.