DealMaker: CBRE Arranges $720M for Southeast Multifamily Portfolio
CBRE Capital Markets, Los Angeles, arranged $720 million to sell the Southeast Residential Portfolio, a 24-property multifamily portfolio, to San Diego-based Strata Equity Group Inc. from an affiliate of New York-based DRA Advisors LLC.
The SERP acquisition is among the largest multifamily transactions in 2016, said CBRE Vice Chairman of Institutional Properties Malcolm McCom, who led the transaction for the seller. The SERP portfolio consists of 6,294 units in suburban locations throughout 13 metro areas in the Georgia, North Carolina, Tennessee and South Carolina.
CBRE Capital Markets’ Debt & Structured Finance team secured $500 million of financing on behalf of Strata Equity Group to acquire the portfolio.
“We are in a favorable market for sellers and buyers to transact in volume,” McComb said. “For assets with a consistent and compelling investment thesis, sellers can achieve attractive pricing with less friction. At the same time, the scale of portfolios allows buyers to make strategic, transformative moves.”
Bill Chiles of CBRE’s San Diego office and Robert LaChapelle of CBRE’s Atlanta office secured the loans for the portfolio. Strata Equity Group diversified the loan terms to match each individual asset and will be financing the portfolio with a mixture of seven- and 10-year fixed and floating rate loans provided by Freddie Mac.
“We were able to procure multiple tranches of loan structures to best fit the client’s individual asset strategy,” Chiles said. “We negotiated a portion of the portfolio under a newly created version of the Freddie Mac Revolving Credit Facility. This facility gives Strata Equity Group more financing flexibility for certain assets, as well as an attractive vehicle for new purchases with similar business plans.”
The properties range in vintage from 1985 to 2000, with an average year built of 1996. The mix of the assets is diversified with 72 percent of the units being two and three-bedroom floor plans and a larger-than-average unit size of 1,100 square feet. Over the past three years, net rental income has increased 12.2 percent while averaging 95.3 percent occupancy.
“This portfolio affords us with a truly unique opportunity to scale our platform while also securing a very attractive, risk-adjusted return for our investors,” said David Michan, President of Strata Equity Group.
“We believe the long-term fundamentals of the apartment sector, particularly Class B product, remain healthy; our investment in SERP reinforces that belief,” added Scott Wittman, Strata Director of Investments.
