ALEXANDRIA, VA. — Real estate investment company Lubert-Adler has teamed up with The Laramar Group to buy a 530-unit apartment complex in Alexandria for $78 million.
The property, named Hunting Point, is located just south of Old Town Alexandria along the Potomac River. The Virginia Department of Transportation (VDOT) was the seller.
VDOT acquired the property in 2002 through eminent domain to allow for construction of the new Woodrow Wilson Bridge. The state agency demolished one of the complex's three buildings and used a large portion of the property's available land for the bridge.
Rents at the property remained relatively frozen under the agency's ownership, which are 30 to 40 percent below market rate, according to a press release by Lubert-Adler. It also hasn't been upgraded in years.
“This was a flat tire that we can transform into a Class A apartment community,” says Dean Adler, co-founder of Lubert-Adler Partners LP, based in Philadelphia. “There is sentiment in the market that multifamily properties are overpriced and there are no longer opportunities to generate attractive profits. We have a contrary view. Stabilized assets may be overpriced, but value-add assets are on the rise because of the overleveraged environment since 2008. We believe we have demonstated this thesis through the portfolio we have assembled in today's market.”
Today, Lubert-Adler has amassed a multifamily portfolio valued at approximately $2 billion for its domestic institutional investors.
The company’s Fund VI, VI-A and VI-B co-investment pool, launched in January 2010 with over $1 billion in equity, has now acquired, among several asset classes, some 70 multifamily properties totaling more than 20,000 units. Most of the assets were acquired in the last 18 months.
“In 2010, we made a strategic decision based on the belief that multifamily rental apartments provide one of the best opportunities to create risk-adjusted superior returns because a substantial portion of the overall return is in the form of current yield,” Adler explains. “We aimed for overall returns of 17 to 20 percent, with 10 to 12 percent of that target coming from current yield.”
As part of its strategy, Lubert-Adler sought out one-off, middle-market acquisitions through local entrepreneurs. According to Adler, the company focuses on transactions that are “too large for local operators but smaller than those that would interest the very large funds.”
“Our goal was to buy assets opportunistically, preferably from sellers who are not in the everyday business of improving real estate, and then work with our local partners to increase current yield by renovating and repositioning the assets,” says Alder. “Now that we have achieved our initial goal, we plan to continue this value-add program into the future.”
Ludler-Adler indicated it would invest some $14 million on improvements to Hunting Point in the next three years, including new lobbies, corridors, rooftop entertainment areas, building systems, mechanical repairs, facade improvements and riverside pool amenities. Individual apartments will be outfitted with new kitchens, baths, windows and flooring, among other upgrades.
— Liz Burlingame