AREA, McDowell Acquire Defaulted Apartment Loans

AREA Property Partners and McDowell Properties have partnered to acquire a portfolio of defaulted loans secured by 17 apartment complexes with 4,733 units located in four states.

Austin, Texas—AREA Property Partners and McDowell Properties have partnered to acquire a portfolio of defaulted loans secured by 17 apartment complexes with 4,733 units located in four states. The overall occupancy rate for the portfolio is 84 percent, which the partners believe will offer “strong upside potential.”

The partnership plans to take possession of the properties. They did not disclose the terms of the deal, but did say in a statement about the transactionthat their investment will be “at an attractive discount to the current debt basis.”

The property portfolio has its greatest concentration in Austin, with seven properties. Three of the other properties are in Dallas; two are in Phoenix; three are in Tulsa; and one each is in Tampa and Jacksonville.

Austin is a particularly strong apartment market right now. According to Marcus & Millichap, some 28,300 jobs will be added in the Austin metro area by the end of 2011, a much higher percentage (3.7 percent up) than most other parts of the country. At the same time, the number of new apartment units coming on the market this year will be only total 250, less than a tenth of the total (2,860) added in 2010.

The properties in Austin are located in two different areas, both offering strong tenant bases, notes the partners. One is northwest Austin, which is home to such corporations as IBM, Apple, the PayPal unit of eBay, and Freescale Semiconductor. The other property is close to Austin’s CBD and the University of Texas campus north of downtown.

New York-based AREA Property Partners, formerly known as Apollo Real Estate Advisors, invests on behalf of pension funds, sovereign wealth funds, insurance companies, foundations, endowments and high net worth individuals. Its funds have collectively invested in over 570 transactions with an aggregated value of about $65 billion. San Francisco-based McDowell Properties is a multifamily specialist whose current portfolio consists of more than 19,200 units.