By D.C. Stribling
In its largest-ever single-asset transaction and first of 2018, Urban Investment Partners has acquired Onyx on First, a 266-unit apartment building in the Capitol Riverfront neighborhood of Washington, D.C., for $95.5 million. UIP partnered with Atalaya Capital Management of New York on the acquisition.
Onyx on First was constructed in 2008 as condominiums, but developer Faison converted it to rental apartments upon delivery, selling the property to JP Morgan Chase in 2013. When Chase put the asset on the market in 2016, the building’s tenants organized under the District’s Tenant Opportunity to Purchase Act (TOPA). ultimately assigning their acquisition right to DC-based UIP.
Under DC’s TOPA, if a building contains more than four rental units, the law provides that a valid tenant association has broad rights when the property is put on the market. For one thing, the seller must provide the tenant organization with a copy of the offer of sale, either prior to contract ratification or afterward.
The offer of sale must include asking price, a statement attesting to the existence of a third-party contract, a statement affirming that the landlord/seller will make pertinent information about the property (including building floorplan if one exists), and an operating expense statement.
No matter the size of the building, the law further provides tenants with an absolute 15-day right of first refusal on any third-party offers to buy the property. If the tenant organization can match the contract from the third party, the tenants have the right to purchase.
The tenants also have the right to sell or assign their rights to a third party. In the case of Onyx on First, the tenant organization heard presentations from a number of interested developers before selecting UIP, thus allowing that company to acquire the property under certain conditions.
New Buildings and Old
“Although most TOPA renovations are in older buildings, it’s not uncommon for a new building’s residents to explore their TOPA rights,” said UIP principal Steve Schwat. “While we have experience with Depression-era buildings in need of major upgrades, we also have supported tenant organizations in newer properties. In fact, many buildings erected in the 1980s are now showing their age and are in need of improvements.”
Under the TOPA agreement, UIP will install cell phone repeaters in the building to improve reception. The company will also improve the outdoor kitchens on the building’s roof deck, install dog runs, and undertake a variety of other building enhancements.
Concurrent with the closing, UIP and Atalaya separated the fee and leasehold, selling the fee to Safety, Income & Growth Inc., a company specializing in long-term ground leases, and entered into a 99-year flexible ground lease. Safety is a REIT managed by its largest shareholder, iStar Inc.
Common-area amenities include a landscaped roof deck and pool, Wifi in common areas, a fitness center, a picnic area with grills, a courtyard with seating areas, 24-hour concierge service, underground parking and controlled-access entry. The property, which is two blocks from Washington Nationals Park at 1100 First St., S.E., also counts as transit oriented because of its proximity to the Navy Yard Metro station.
Andy Weiss of Gem Equity structured the placement of the ground lease. Jacob Katz of Meridian Capital represented Capital One and Fannie Mae in placement of the debt.
UIP holds more than 2,400 units in Washington, D.C., and Maryland. Over the years, it has invested more than $1 billion in acquisitions, renovations and sales of area rental apartments and condominiums, totaling some 5,000 units.