MHN Exclusive: Wharton Acquires 18 Apartment Communities for $250M

Wharton Equity Partners completes the joint venture acquisition of 4,179 units with plans for a value-add play.


By Jeffrey Steele, Contributing Writer

New York—Wharton Equity Partners has completed the acquisition of an 18-property multifamily portfolio encompassing 4,179 units.  The New York City and Miami-based real estate investment firm paid $250 million for the portfolio.  The acquisition brings Wharton Equity’s recent multifamily purchases to over $400 million, a total the firm is seeking to significantly add to in 2014 with its expansion into the New York City  area and Miami markets.

Wharton completed the purchase via a joint venture with an institutional partner and BH Management, a national multifamily property owner and operator.  Wharton will provide comprehensive asset management and operating partner oversight, while BH will serve as the property manager.

Most of the portfolio is situated in North and South Carolina, with the remainder located in Kentucky, Kansas, Texas and Georgia.  Many of the portfolio’s properties are in highly sought after markets such as Columbia, S.C., Charlotte and Savannah.

“The properties were undercapitalized,” Peter Lewis, president and founder of Wharton Equity Partners tells MHN.  “Besides deferring capital improvements, there were not sufficient funds for proper marketing and other less tangible initiatives, [such as] landscaping, lighting and signage.  This erodes employee morale, as well as reduces the competitiveness of the properties.  With the capital Wharton and its partners are bringing to the portfolio, we believe the properties will be quickly infused with a new sense of excitement and commitment.”

Lewis reports that several factors attracted Wharton Equity to the portfolio.  Among them were locations in strong secondary markets, the potential to add value through interior and exterior improvements, and the fact that the transaction size provided economies of scale.  In addition, Wharton was able to negotiate directly with the seller in an off-market transaction.

Challenges included coordinating due diligence on 18 assets, and closing within 60 days, as required under the contracts.  Another hurdle was securing nearly $200 million in debt “flexible enough to allow us to execute on our business plan of repositioning and selling the assets,” Lewis says.

Wharton Equity intends to invest approximately $17 million into the properties over the coming 18 months.  That capital infusion will go toward completing deferred maintenance and undertaking value-add upgrades to the properties and unit interiors.

With the firm’s history in residential development, Wharton Equity always brings a fresh perspective to its examination of properties, Lewis says.  That perspective may result in the company initiating simple steps like the relocation of signage, the addition of lighting or the painting of an accent wall in a model.  It may also mean evaluating staff and assisting in training.

“Given Wharton’s experience in construction, Wharton will work closely with BH Management in reviewing capital improvement programs,” Lewis says.