TruAmerica, Investcorp JV Executes 5th Acquisition

The investment managers purchased the L.A.-adjacent, 552-unit apartment community for $92 million, their fifth and largest joint venture transaction in two years.
TruAmerica and Investcorp's latest value-add play is The Highlands, a 552-unit, garden-style community in Southern California's Inland Empire.

TruAmerica and Investcorp’s latest value-add play is The Highlands, a 552-unit, garden-style community in Southern California’s Inland Empire.

Los AngelesTruAmerica Multifamily and Investcorp have acquired The Highlands, a 556-unit garden-style apartment community in the Inland Empire community of Grand Terrace, Calif., in an off-market transaction valued at $92 million.

The Highlands represents a particularly attractive acquisition with several compelling value-add strategies, including tiered interior renovation packages designed in response to market demands,” said Brian Kelley, managing director with Investcorp’s real estate group.

Built in two phases between 1986 and 1988, The Highlands includes one- and two-bedroom layouts, each with a private patio or balcony. Every unit features an energy-efficient kitchen, full-size washer and dryer, ceiling fan and a private garage. Shared amenities include a clubhouse with a screening room and business center, four resort-style swimming pools, playground and 24-hour fitness center.

“Highlands represents for our investors an opportunity to gain investment exposure in one of the top-performing Western submarkets with a proven, active operating partner,” Kelley told MHN.

The Inland Empire is charted territory for TruAmerica, whose footprint in the area totals 1,665 units across seven properties. Here, fundamentals remain strong as Angelenos trade city living—and its escalating cost—for a more affordable alternative just 60 miles east of downtown L.A. In this particular submarket, known as Colton/Loma Linda, vacancy rates should average 1.7 percent over the next five years, compared to 2.5 percent for the Inland Empire as a whole.

A vertically integrated value-add firm, TruAmerica acquires, renovates and manages 31,000 apartment units worth approximately $6.5 billion. Its institutional capital partner Investcorp provides corporate, real estate and alternative investment solutions, with $10.8 billion in assets under management.

Since forming a JV 2 years ago, the partnership has completed five investments, the largest of which is The Highlands. In May of this year, MHN reported the two firms’ then-largest acquisition, a $56 million apartment community in Phoenix. Now, the JV owns and operates more than 2,400 multifamily units in California, Nevada, Arizona and Colorado.

TruAmerica and Investcorp will launch a multimillion-dollar capital improvement program to upgrade individual units, the building exterior and common area amenities.

“Because of the excellent condition and aesthetic appeal of the property, our primary focus will be on improving the unit interiors with such things as appliance packages, new shaker-style cabinet faces and carpet,” added TruAmerica COO Lynn Owen. “In order to appeal to a diversified renter pool, approximately half the units will be upgraded to an even higher specification with stainless steel appliances, dark vinyl-wood flooring, drop lighting and new brushed nickel hardware. Members of our construction management team are already on site developing a comprehensive and detailed plan for the renovation.”

Intensive asset management underlies the investment strategy. “With our existing presence in this market, we will be able to achieve synergy through economies of scale and by leveraging existing operational experience,” said Greg Campbell, senior managing director of acquisitions and dispositions for TruAmerica.

Charles Halladay and Mike Gigliotti of HFF arranged financing for Investcorp and TruAmerica’s investment, which will benefit from long-term, floating rate, agency debt.

Image courtesy of The Highlands at Grand Terrace