Forest City, Bernstein Management Strike JV for D.C. Apts.

Lenox Park in Silver Springs, Md.

Cleveland, Ohio–Forest City Enterprises Inc. has formed a joint venture with Bernstein Management Corp. for ownership of three residential multifamily properties, totaling 1,340 rental units, in the Washington, D.C. metropolitan area.

The driver to the deal was Forest City’s goal to raise some capital, while still holding on to these assets, says David Levey, Forest City Enterprises’ executive vice president. Forest City likes the Washington, D.C. rental market, and the transaction will allow Forest City to retain operational control of the properties.

The three properties are the 549-unit Grand in North Bethesda, Md.; the 385-unit Lenox Club in Arlington, Va.; and the 406-unit Lenox Park in Silver Springs, Md. Each company’s joint venture entity will own 50 percent of Forest City’s prior stake in the properties. Forest City expects to realize proceeds of approximately $34 million from the creation of the joint venture, with the transaction equating to a cap rate of 6.5 percent, based on 2009 net operating income for the properties. Bernstein Management is an acquirer, manager and developer of commercial and residential properties in the Washington, D.C. metro area.

However, Levey says this kind of deal may not be easy to replicate at other properties.

Calling it “not a typical transaction,” Levey says this type of joint venture transaction “is a little more difficult. It’s a lot easier to sell.”