Bidders Brave Blizzard to Buy Arlington Apartments for $118M

Dees Stribling, Contributing Editor

Arlington, Va.–Crescent Heights of America, acting through an L.L.C. called 1301 N. Troy, has bought the Palatine, a 262-unit multifamily complex in Arlington, Va., for $118 million, or about $450,000 per unit. The property sold during a foreclosure auction.

“Investor demand is there,” David R. Nachison, the managing director of Holliday Fenoglio Fowler’s Washington DC office, which arranged the auction for the lender, tells MHN. “The investors who are after assets like the Palatine are everything from institutional to private to international, and they responded to the opportunity for a quality property, because so few of them are for sale now.”

Nachison estimates that the bidders for the property–who showed up despite the fact that the auction was held on a February day that saw the Washington DC area buried in snow–represented about $1.2 billion to $1.3 billion worth of investment capital that day. “That’s if you add up all the bids of the investors who were there, really to pay in cash,” he explains. “They were out looking for best-quality, best-location, trophy assets, and they believe now is a good time to bid on them, when the opportunity arises.”

Moreover, investors seem willing to pay for those assets in expectation that the market will turn, if the roughly 4.5 percent cap rate for the Palatine is any indication. The new owners plan eventually to go back to the original plan, and convert the property to condos.

Completed in 2008, the development barely made it out of the ground before the U.S. property bubble burst, though conditions in metro Washington DC have fared somewhat better than the national average for most property types, including apartments. The Palatine is currently 95 percent occupied, but as an apartment complex–the developer, Monument Realty, had intended the property to be condos from the get-go.

Sales of the units dried up, however, so Monument decided to rent the building units. The property includes a mix of one-, two-, and three-bedroom residences that average 1,055 square feet, as well as various amenities, such as a rooftop pool, fitness center and business center. The property’s location in the Rosslyn-Ballston corridor of Arlington, within walking distance of a Mertorail station with direct access to downtown Washington, was also a selling point.

“Rosslyn-Ballston is one of the tightest submarkets in the entire metro D.C. area,” says Nachison. “All recently delivered apartment supply has been quickly  absorbed and leasing concessions are rapidly being reduced by landlords in the area.”