Capital Square Restructures Investments in Virginia Luxury Apartments

A new REIT-style investment structure resulted in returns at 161 percent on original investment.

Saltmeadow Bay Apartments. Image courtesy of Capital Square

Capital Square has completed the full conversion of Delaware Statutory Trust Investments in Saltmeadow Bay Apartments to Capital Square Apartment REIT, an investment and ownership arrangement structure worth $72 million. As part of the transaction, 85 percent of the property’s previous DST partners gained operating unit shares within the REIT, with returns reaching 161 percent of their original investments.

Investors were given the option of either exchanging their previous DST investments in the property on a Section 721-compliant tax-deferred basis, the ability to structure a separate Section 1031 exchange within the scope of their current investment or to cash out on a portion of or all of their shares in the property.

As part of the new ownership and investment structure, Capital Square Apartment REIT will assume the property’s ongoing $48.6 million CMBS acquisition loan from Fannie Mae, with the same lender providing a supplemental loan following its conversion. Walker & Dunlop represented the owner in procuring and arranging both loans. Additionally, the new ownership structure received approval from two separate MAI-designated appraisers, alongside consultations from investment banking firm Robert A. Stanger & Co.

Saltmeadow Bay Apartments, in-depth

Saltmeadow Bay Apartments is a four-building, 229-unit luxury apartment community located at 757 Saltmeadow Bay Drive in Virginia Beach, Va. The property was built in 2006 over 24 acres and was purchased by Capital Square in 2019 for $48.6 million, as part of a DST-designated Section 1031 Exchange program.

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The property is sectioned into one-, two- and three-bedroom living arrangements ranging between 866 and 1,598 square feet, which feature stainless steel appliances, granite countertops, hardwood-style floors, fireplaces, in-house laundry units and private patios and balconies. Amenities include a swimming pool, fitness center, landscaped courtyard and pavilion, clubhouse, business center and covered private parking areas. The community is near the beach, as well as the city’s main commercial corridor. An on-ramp to U.S Route 58 is a quarter-mile the north, giving residents highway access to much of the Hampton Roads metro.

Capital Square’s Southern investments

The ownership conversion of Saltmeadow Bay Apartments is the firm’s latest acquisition in the Mid-Atlantic, alongside a string of build-for-rent and build-to-rent purchases and fundraising in the South. In March, the firm purchased Ashford Townes, a 74-unit community in Fuquay-Varina, N.C., with the goal of raising $13.7 million in equity. In February, the firm acquired Brighton Woodstock, a 100-unit build-to-rent townhome community in Atlanta. The firm acquired the property through a DST-structured offering, establishing Brighton Woodstock BFR Housing, DST, an investment fund intended to collect $22.5 million.

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