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REA
February 27, 2019  

Portion of Lone Star Apartment Sale in Flux

Morgan Properties is evidently scaling back its planned purchase of an East Coast apartment portfolio from Lone Star Funds.

As previously reported, Morgan Properties had agreed to pay $1.4 billion for 15 complexes in Northern Virginia, Maryland and the Philadelphia area. That package encompassed 6,696 units, at an average value of $211,000/unit.

The King of Prussia, Pa., company is moving ahead with the Philadelphia and Virginia components, but the Maryland portion is now up in the air, sources said. The reason for the change, which would cut more than a third of the units from the deal, is unclear.

Market pros said that Morgan Properties will pay roughly $900 million for the rest of the portfolio: seven properties with 2,346 units in the Philadelphia area and three in Northern Virginia with 1,784 units.

While Lone Star and its broker, CBRE, declined to comment, some investors said the Maryland properties were put back out for bid. Those complexes, with 2,566 units, are worth an estimated $475 million. It wasn’t clear if Morgan Properties is completely out of the picture. Harbor Group International is believed to have considered a bid but decided against proceeding. That Norfolk, Va., investment manager recently paid Lone Star $390 million, or $226,000/unit, for six suburban Boston properties with 1,722 units.

Dallas-based Lone Star assumed all the properties via its $6.8 billion takeover of Home Properties in 2015. That Rochester, N.Y., REIT owned 121 properties with 41,917 units. Since late 2017, Lone Star has sold several large portfolios worth more than $4 billion combined, including Home Properties assets.

In another pending deal, Kushner Cos. of New York has agreed to pay approximately $1.1 billion for a package of Lone Star apartment complexes in Maryland and Virginia, as first reported by The Wall Street Journal. That deal encompasses 6,030 units across 16 properties, known as the Pillar Portfolio. Developed between 1964 and 2002, they have an average occupancy rate near 95%.

The sale to Kushner includes 11 Maryland properties:

Bonnie Ridge (960 units) in Baltimore.

Elmwood Terrace (504 units), Wellington Trace (240 units) and Hunters Glen (108 units) in Frederick.

Canterbury (618 units) and Cambridge Court (544 units) in Rosedale.

Owings Run (504 units) in Owings Mills.

Saddle Brooke (468 units) in Cockeysville.

Tamar Meadow (178 units) and Greens at Columbia (168 units) in Columbia.

Annapolis Roads (282 units) in Annapolis.

The other five complexes are in Virginia:

Seminary Towers (545 units) in Alexandria.

Courts at Fair Oaks (364 units) in Fairfax.

Manor (198 units) and Manor East (164 units) in Leesburg.

Sycamores (185 units) in Reston.