Security Properties, Rockwood Acquire 938-Unit Portfolio

The Ardea. Image courtesy of Security Properties

Security Properties and an affiliate of Rockwood Capital have expanded their Western U.S. footprint with the off-market acquisition of two assets in Oregon and one in Colorado totaling 938 units.

The firms did not disclose the seller of the portfolio or the prices paid for the assets—The Ardea, a 323-unit Class A high-rise located in Portland, Ore.; Windward, a 200-unit Class A+ missed-use project in Lake Oswego, Ore.; and The Metro, a 415-unit Class A- asset in Denver. However, Yardi Matrix lists the most recent owner of both The Ardea and The Metro as Multi-Employer Property Trust (MEPT), a BentallGreenOak fund that is an open-end commingled real estate equity fund investing in a diversified core portfolio of institutional-quality real estate assets in the United States.

In November 2015, MEPT entered into a joint venture with PHK Development Inc. to develop the $103 million Windward project in Lake Oswego. In addition to the 200 apartments, the asset has about 36,500 square feet of retail space.

Davis Vaughn, senior director at Security Properties, called the portfolio transaction one of the most exciting acquisitions in the company’s 50-plus year history. He said in a prepared statement that off-market acquisitions of this scale are rare, especially considering the quality of the assets. Vaughn said Windward was the premier suburban asset in the entire Portland MSA. He noted the partnership acquired The Ardea at a basis significantly below replacement cost and said The Metro was a well-located urban asset that was poised to capitalize on Denver’s continued growth.

Matthew Friedman, a Rockwood Capital managing director, also called the properties high-quality assets and said they fit with the New York-based real estate investment management firm’s investment thesis of acquiring assets that occupy strategic locations within their markets. Friedman said in prepared remarks the properties are located in the firm’s target markets and all offer tenants access to outdoor amenities, retail options and proximity to employment centers.

The portfolio will be managed by Security Properties Residential, an affiliate of Security Properties.

The Properties

The Ardea is located at 3720 SW Bond Ave. in the South Waterfront neighborhood in Portland, a newly developed area along the west bank of the Willamette River. Situated about 10 minutes south of Portland’s Central Business District, the area is anchored by the city’s largest employer, Oregon Health and Science University. Built in 2008 by Gerding Edlen Development, the 30-story building was sold to MEPT in August 2008 by Gerding Edlen for $145 million, or $448,916 per unit, according to Yardi Matrix data. The property has occupancy of nearly 93 percent and residences ranging from studios and one- and two-bedrooms to penthouses. Rents range from $1,492 to $5,051 with an average of $2,202, Yardi Matrix reported. The Ardea has 17,000 square feet of retail space.

Windward is located at 130 A Ave. in downtown Lake Oswego, the zip code with the highest median income in Oregon. Windward is an award-winning project completed in 2018. Among the many accolades the 2.1-acre, three-building project received was a Gold award in the Development & Design: Low-Rise category of the MHN 2018 Excellence Awards. Developed by PHK Development Inc. and designed by ZGF Architects, the project was praised for its “successful integration into the surrounding neighborhood” and for recreating a village center feel. The multifamily portion of the property has occupancy of about 91 percent. Residences range from studios to penthouses and feature rents ranging from $1,800 $6,578 with an average of $3,183, according to Yardi Matrix data.

The Metro is located at 2121 Delgany St. and was completed in 2003. MEPT acquired the asset from CBRE Global Investors in November 2012 for $90.8 million, or $218,795 per square foot. Previous owners include DWS and Lincoln Property Co. The property has six buildings on 5.7 acres and occupancy of about 92.3 percent. Situated in the Ball Park neighborhood, The Metro provides residents with convenient access to the downtown core. It is within walking distance of Union Station, the central hub of Denver’s regional transit system. The asset has efficiency, one-, two- and three-bedroom units with rents ranging from $1,288 to $4,494 with an average of $1,855, according to Yardi Matrix data.

Earlier Deals

Security Properties and Rockwood Capital have teamed up on earlier multifamily investments. In May 2019, a joint venture between the two companies acquired Taluswood, a 512-unit apartment community in Mountlake Terrace, Wash. One of the largest garden-style apartment complexes north of Seattle, the property has convenient access to employment hubs in Everett, Wash., and Seattle as well as the East Side’s high-tech corridor.

More recently, in October, Rockwood Capital sold MetroPointe Apartments, a 415-unit community in Tempe, Ariz., to Cortland for $96.8 million. Rockwood had acquired the property from Security Properties in July 2018 for $76 million.