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Mar. 26, 2012

The Federated Companies Announces Sale of Multifamily Parcel

By Jeffrey Steele, Contributing Writer

Wilmington, Mass.—In a transaction valued at $4.1 million, a 12-acre Wilmington, Mass., development site has been sold by The Federated Companies to EA Fish Development.

Situated adjacent to Wilmington’s commuter rail station at Rts. 38 and 62, the land is fully entitled for an MGL Chapter 40-B mixed-income, 108-unit rental community featuring a pair of three-story garden-style apartment buildings and an enclosed 35-space parking garage.

It was the prime location that initially attracted The Federated Companies to the site, and also helped generate a significant return to the company‘s investors. The sale delivered a 2.1 times equity multiple in little more than four months.

“We originally chose the site because it was truly a transit-oriented development site,” Brian Connell, Miami-based CEO of The Federated Companies, tells MHN. “This suburban Boston location offers commuter convenience into Boston. That drives a premium for this type of site.”

The development site is less than two miles from Interstate 93, and residents will be able to commute to Boston in less than 30 minutes.

Noting, “the market for multifamily development has improved significantly,” Connell reports that from the standpoint of implied capitalization rates, The Federated Companies’ multifamily development projects have historically enjoyed a 250 to 350 basis point premium above the stabilized apartment market.

“However, over the past year, we have seen significant compression in that spread, which is similar to what we witnessed with stabilized deals as investors look beyond straight acquisitions in order to meet their performance expectations,” he adds. “The direct impact of this is evident in the increase in land prices in opportunities such as Wilmington.”

The Federated Companies has completed demolition of the industrial structure that previously occupied the site, and construction can begin immediately.

“While our intent was to build the community, the offer to buy the property presented an opportunity to quickly monetize our investment in the site to date, in order to re-purpose our capital,” says Gerard Yetming, chief investment officer of The Federated Companies. “We intend to aggressively acquire and develop higher-density assets in urban infill locations.”

The Federated Companies is selling several suburban land sites and existing apartment assets in its portfolio to focus its development and construction resources on its three marquis sites, which are mixed-use urban infill projects totaling almost 2.5 million square feet in New England and South Florida.

“We intend to reallocate capital from Wilmington and some of our other land holdings into other asset classes, such as hospitality, where there may be opportunities to acquire higher-yielding assets that, with positive leverage, will generate more attractive risk-adjusted returns relative to multifamily development,” Connell says.

“In regard to the three marquis sites, we believe there is a shift occurring in both large and small cities, and people are embracing the intensity and diversity of the work-live-play environment of urban downtown. Going forward, The Federated Companies intends to continue to place significant emphasis on these core, urban projects.”

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