Dune Real Estate Partners and Pantzer Properties have acquired a $460 million multifamily portfolio in the Washington DC suburbs investing roughly $100 million of equity, PERE has learned.
The two New York-based investment firms acquired the portfolio, which comprises a total of 2,580 units in eight separate apartment buildings in Virginia and Maryland, on a 50-50 basis buying the assets on behalf of Dune’s $793.9 million Real Estate Fund II, which closed in 2009, and Pantzer’s Panco Strategic Real Estate Fund I, which closed on more than $100 million in late 2008.
In a statement, Pantzer, which sourced the deal and will manage the portfolio, said the acquisition marked the Panco fund’s 14th investment.
The portfolio was purchased from RREEF after the loan – which remains current – was sent to special servicers, according to people familiar with the matter. RREEF originally acquired a partial interest in the portfolio, known as the Magazine Portfolio and initially assembled by the former Town & Country REIT, in 2006, according to data provider Real Capital Analytics.
Three CMBS deals are tied to the portfolio, with the debt slightly modified and assumed by Dune and Pantzer, sources added. Among the CMBS deals affected are MSC 2007-IQ13, which holds a $147 million exposure to the portfolio, MSC 2007-HQ11, which has a $138.5 million exposure to the Magazine Portfolio, and MSC 2007-HQ12, which has $124.5 million of exposure, according to CMBS data provider Trepp.
The CMBS loans were slated to mature in December 2011, Trepp said in a review of the deal Monday. Sent to the special servicer in mid-2010, RREEF reportedly said in servicing notes at the time that it had “very little liquidity and was not in a position to devote any additional capital to the portfolio”. Trepp added that the debt service coverage ratio has been around 1.0x “for the last few years”.
Cia Buckley, Dune partner, said in a statement the shift away from homeownership toward rental apartments was “creating very attractive opportunities to invest in multifamily assets. As the economy recovers, capital is beginning to flow back into this market and we are expecting rents to increase over the next three to four years.”
Edward Pantzer, chief executive officer of Pantzer, said the Washington DC metro area was “widely considered to be the most desirable real estate market in the country with job growth, employment and apartment occupancy rates that rival all other cities in the US”.
The portfolio was brokered by Jones Lang LaSalle, which said in a separate statement that Dune and Pantzer would benefit from “significant rent growth in the future given the lagging construction pipeline in the region and the opportunity to generate increased revenue from continued upgrades to the properties”. The portfolio includes Barton’s Crossing in Alexandria; Carlyle Station in Manasass; Glen at Leesburg in Leesburg; Lionsgate in Herndon; Village at McNair Farms in Herndon; University Heights in Ashburn; Fox Run in Germantown, Maryland and Watkins Station in Gaithersburg, Maryland.
Dune Real Estate recently also created a $1 billion joint venture with JPI Multifamily Partners called TDI/Dune Real Estate Investments targeting multifamily deals across the US.