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REA
February 13, 2019  

Lone Star Strikes $1.6 Billion of Rental Sales

Two investment shops have agreed to buy 19 value-added apartment properties from Lone Star Funds in separate transactions totaling $1.6 billion.

Morgan Properties of King of Prussia, Pa., is under contract to pay $1.4 billion for 15 complexes in the Philadelphia, Baltimore and Washington areas. The package encompasses 6,696 units, putting the per-unit valuation at $211,000. One Wall Partners of Newark, N.J., will pay $180 million, or $181,000/unit, for four properties with 996 apartments in Eastern Pennsylvania’s Lehigh Valley. CBRE is handling both transactions, which are expected to close over the next several weeks.

The sales will complete Lone Star’s disposition of 33 properties for a total of roughly $2.5 billion. The Dallas shop put the East Coast complexes on the block in the second half of last year, listing 26 with CBRE and the other seven with Newmark.

As previously reported, the Dallas shop struck deals to sell the other 14 properties to Fairfield Properties of Melville, N.Y. (seven); Harbor Group International of Norfolk, Va. (six); and Jones Street Investment of Boston (one).

Morgan Properties, which was founded in 1985, has about $6 billion of assets under management, according to its website. Market pros said that in recent years the owner-operator has been increasingly interested in buying big and buying close to home — and this deal checks both boxes. “They believe they get better pricing when they buy in bulk because the buyer pool is thinner,” said one source.

One Wall Partners, which was founded in 2010, initially focused on acquiring properties in Northern New Jersey. But last year it bought the 498-unit complex at 155 East Godfrey Avenue in Philadelphia for $49.3 million. The Lone Star deal will greatly expand its Pennsylvania footprint.

The properties being bought by Morgan Properties are about 96% occupied and were mostly built in the 1960s and 1970s. They include the 1,387-unit Mount Vernon Square in Alexandria, Va.; the 1,050-unit Morningside Heights in Owings Mills, Md.; the 858-unit Charleston Place in Ellicott City, Md.; and the 631-unit Home Properties of Devon in Devon, Pa. The remaining 11 have 132-376 units.

The Pennsylvania properties being acquired by One Wall Partners are roughly 97% occupied and were built between 1965 and 2006. They are the 384-unit Landings in Bethlehem; the 250-unit Trexler Park in Allentown; the 216-unit Trexler Park West in Allentown; and the 146-unit Brooke at Peachtree Village in Whitehall.