A Bronx tale

Apollo Real Estate Advisors knows a thing or two about investing in New York City—and not just in the tonier parts of Manhattan. Over the past six months, the private equity real estate firm behind the Time Warner Center, one of the largest developments in the city's recent history, has also announced a $500 million (€407 million) mixed-use project in Queens, the acquisition of a rental apartment in Harlem and the opening of a luxury condominium in Carroll Gardens, Brooklyn.

Now the intrepid New York investor has turned its attention to the Bronx, a borough more often associated with urban blight than big-city profits. The private equity real estate firm recently announced the acquisition of an eight-building apartment complex in Soundview, to be renamed the Lafayette Estates, for $100 million.

James Simmons, a partner at Apollo, points to the location of the complex as one of the factors that drew the firm to the project: the buildings, located on the Long Island Sound next to a nature preserve, are “an enclave in and of itself.” Yet the most attractive feature of the deal according to Simmons was the captive base of buyers currently living in the building. For over 10 years, the tenants had been working to convert the rental units to an affordable housing cooperative.

“When I got involved two years ago, there was very little I had to do to convince the tenancy that buying and home ownership was the appropriate thing for them to do,” says Simmons.

That's not to say that negotiating the deal was easy. Given the state of the property, which had been in technical default, and the need to ensure affordable housing status, Simmons estimates that seven to eight government agencies were involved in the process. He singled out the Bronx borough president, Adolfo Carrion, Jr., as being particularly helpful in moving the transaction along.

Apollo is currently looking at a number of other projects in the greater New York City area and plans to invest more than $1 billion in the region over the next three years. Like the Lafayette Estates transaction, one of the major property sectors the firm is focusing on is affordable and middle-income housing.

“Given the recent run-up in real estate, a person who is making an ordinary living wage is priced out in this city,” says Simmons. If a firm is able to fill this market need in a creative way, he explains, it can “create a win-win scenario” for both parties.

Cerberus-led consortium nabs Albertsons
An investor group including hedge fund Cerberus Capital Management, drugstore chain CVS, grocer Supervalu and retail REIT Kimco Realty has purchased Boise, Idaho-based supermarket chain Albertsons for $11.1 billion (€9 billion) in cash and stock, as well as the assumption of $6.3 billion of debt. The consortium reportedly plans to break Albertsons into three parts: CVS will expand its brand with the addition of the Albertsons drugstores, Supervalu will acquire more than 1,100 new supermarkets and Cerberus will pick up 655 grocery stores, largely in the Western US and Florida. Real estate groups Schottenstein Stores, Lubert-Adler Partners and Klaff Realty also participated in the deal.

Onex buys Town and Country for $1.5bn
A subsidiary of Toronto-based private equity firm Onex Corporation, Onex Real Estate, has entered into a joint venture with Morgan Stanley Real Estate to acquire The Town and Country Trust for C$1.5 billion ($1.3 billion; €1.0 billion) in cash and debt. The REIT owns and operates 39 apartment complexes in the Mid-Atlantic region and Florida. Onex Real Estate was founded last year and has C$240 million in capital commitments.

Thayer sells Orlando resort for $750m
Annapolis, Maryland-based private equity real estate firm Thayer Hotel Lodging is selling the 1,582-room Grande Lakes Resort to Orlando-based private investment group CNL Hotels & Resorts for $753 million (€613 million). Thayer built the Grande Lakes, which opened in July 2003, in conjunction with Marriott International. The 500-acre, Orlando resort includes both a 584-room Ritz Carlton Hotel and a 998-room JW Marriott Hotel, in addition to more than 125,000 square feet of meeting space, a 40,000 square foot spa and a golf course designed by Greg Norman.

LA hotel sold by Carlyle
The Carlyle Group has sold the Hilton Pasadena to a joint venture between The Amstar Group and Davidson Hotel Company for a reported $65 million (€53 million). The 296-room hotel was acquired in 2004 for $36 million by Carlyle and Davidson, who then invested $5 million in a complete renovation of the hotel lobby, restaurant and guestrooms. Carlyle Realty Partners IV, the firm's latest domestic real estate fund, closed on $950 million in August of last year.

Colony, Saudi prince pay $3.9bn for Fairmont Hotels
Los Angeles-based private equity real estate firm Colony Capital and Kingdom Hotels, the investment group owned by Prince Alwaleed bin Talal, have agreed to purchase the Fairmont Hotel chain for $3.9 billion (€3.2 billion). The hotel company, which had been the subject of takeover discussion for months, had also been targeted by financier Carl Icahn and Starwood Capital, among others. Fairmont will be combined with Raffles Hotels, which Colony acquired last year for approximately $860 million, to form a luxury chain with 120 hotels in 24 countries.