TODAY'S DEALS: Lee & Associates Lands $175M Recapitalization for San Francisco Asset

Lee & Associates secures an equity partner for a large San Francisco asset; American Campus Communities acquires two properties totaling 1,927 beds; and Palatine Capital sells a community for double its acquisition price.

San Francisco—Lee & Associates has brought $175 million in preferred equity to a recapitalization of Park Merced Apartments, a 3,100-plus unit community located at 3711 Nineteenth Ave. in San Francisco.

Under terms of the joint venture agreement, Palo Alto, Calif.-based Essex Property Trust Inc. joins with a partnership of Fortress Investment Group LLC as a new, preferred equity partner in the property.

Jim Fisher, Craig Stevens and Mike Smith of the firms Los Angles North/Venture office arranged the transaction.

American Campus Communities acquires $208M in assets

Austin—American Campus Communities Inc. has completed the acquisition of 26 West Apartments in Austin, and established a controlling interest in The Varsity in College Park, Md. The two transactions represent a combined total asset value of $208 million and 1,927 beds.

26 West is located a block away from the University of Texas in the West Campus submarket of Austin. The 1,026 unit community opened in 2008 and was purchased for $86.2 million on December 7, 2011. The community is currently 98 percent occupied, Amenities include a clubhouse with fitness center, computer lab, recreational room and outdoor amenities featuring a swimming pool.

On December 28, 2011, American Campus acquired a 79.5 percent interest in the existing entity that owns The Varsity based on a total value of $121.5 million. The company has full operational control of the property, which is located next to the University of Maryland campus. Amenities include a two-story fitness center, business center, game room, study lounges and an outdoor courtyard.

“These two acquisitions along with our 11 owned development properties being delivered in Fall 2012 represent $593 million in premier core assets,” says Bill Bayless, chief executive officer at American Campus. “Each of these 13 properties meets our disciplined investment criteria of a differentiated product located either on campus or within walking distance to each respective university and are located in submarkets with barriers to entry.”

Palatine Capital turns around apartment property and sells it for double acquisition price

Nashville, Tenn.—Palatine Capital Partners  announced that it has sold Apartments at Stonebrook located in Nashville, Tenn., totaling 320 units.

Palatine acquired the property in May 2010 for $7 million. At the time of Palatine’s acquisition, the property was in receivership. It was significantly distressed and suffered from material deferred maintenance. Palatine undertook a major physical rehabilitation, including new siding, doors and windows. Through its rehabilitation program and proactive management efforts, Palatine stabilized operations, resulting in materially higher rents and occupancy. Palatine sold the property on Dec. 28, 2011 for $14.5 million to a national apartment buyer based in New York City.

“This is a fantastic realization for Palatine,” said Alex Hurst, founder and managing partner of Palatine Capital Partners. “Stonebrook represents a victory for us in terms of successfully repositioning, stabilizing and selling an apartment property. We substantially improved the physical condition of the asset by investing almost $7,000 per door,” Hurst adds. “We took an underperforming property and turned it around, generating close to a 300 percent  gross return on equity.”

Palatine is continuing to make opportunistic investments in the apartment space and to acquire secondary debt across all asset classes. Hurst says, “We are actively looking to expand our apartment portfolio, with a particular focus on ground-up development in the Southeast and mid-rise properties across the country.”

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