Grubb & Ellis Apartment REIT to Undergo Growth Spurt with $182.4M Acquisition Deal

Mission Rock Bridge

Santa Ana, Calif.–Grubb & Ellis Apartment REIT Inc. is on track to increase its portfolio by over two-thirds and bring a new management business into the fold in one fell swoop. The Santa Ana, Calif.-based company has just entered into definitive agreements to purchase nine apartment properties totaling 2,676 units in three southern states, as well as Mission Residential Management L.L.C. from affiliates of MR Holdings L.L.C. for a total of $182 million.

Presently, Grubb & Ellis Apartment REIT has a portfolio consisting of 3,747 residential units at 14 properties valued at approximately $358 million. Of the nine apartment properties under contract for purchase, five are located in Texas. The Lone Star State group consists of the 364-unit Mission Tanglewood and the 298-unit Mission Barton Creek in Austin; the 258-unit Mission Mayfield Downs in Grand Prairie; the 226-unit Mission Rock Ridge in Richardson; and the 194-unit Mission Preston Wood in Richardson. The REIT will also get its hands on two Tennessee properties–the 380-unit Mission Brentwood in Brentwood and the 360-unit Mission Briley Parkway in Nashville. The final two apartment communities in the portfolio are located in North Carolina; Mission Capital Crossing features 356 residences in Raleigh and Mission Battleground Park offers 240 units in Greensboro.

Grubb & Ellis will pay for the portfolio with cash, debt and limited partnership interests in the REIT’s operating partnership. Mission Residential Management will cost Grubb & Ellis an additional $5.5 million in the form of a cash payment and the assumption of certain liabilities. The property management entity oversees a group of 41 communities in Georgia, Texas, North Carolina, Tennessee, Utah and Florida. The assets account for an aggregate 12,000 residential units, including the 2,676 units that the REIT will soon acquire.

The national apartment market is in recovery mode. “We took the first hit in the commercial real estate sectors and we are the first to come out of the trough,” Gus Remppies, president and chief investment officer of Grubb & Ellis Apartment REIT, tells MHN. “The multifamily sector is probably in as good a position as we’ve been in a long time.” For multifamily, the hit came early on with the country’s massive job losses, which forced many renters to consolidate households and prevented some would-be renters from forming new households. “Now we’re starting to see people rent again,” he notes. “Our portfolio is currently 95 to 96 percent occupied and that is the first time in five or six quarters that we’re up, and we are starting to see rental growth for the first time in a long time.”

Grubb & Ellis Apartment REIT experienced the inescapable decline in occupancy levels, but, having hit a low point of approximately 91 percent, the company did not suffer the shockingly high vacancy rates seen in, say, the office and retail sectors. And as for the future, the REIT anticipates consistent improvement. “Nothing new is getting built in our markets and more homeowners are coming back, and the trend is going to continue,” Remppies says. “Over the next three to four years, youngsters will be coming out of school and probably won’t be in a position to purchase a house. So between the lack of new product and the downturn in the single-family housing market, we are very bullish on operations on the multifamily side.”