A Lake Forest apartment complex was among 10 properties that recently changed hands in a mega-deal announced this month between UDR Inc. of Highlands Ranch, Colo., and Arlington, Va.-based AvalonBay Communities Inc.
The apartment investors swapped complexes with a total of 2,478 units in a deal they valued at $500 million.
AvalonBay, the second-largest publicly traded apartment owner in the country, picked up six complexes in Southern California, including Lake Forest’s Arboretum.
The 225-unit garden-style complex is located near Lake Forest Drive and Muirlands Boulevard, less than a mile from the San Diego (I-5) freeway.
The Arboretum property was last valued at about $49 million, or about $218,000 per apartment, by UDR, according to regulatory filings. It bought the complex, which was built in1970, in 2004.
Monthly rents at the complex average about $1,400.
UDR got three complexes in Massachusetts and another in San Francisco from AvalonBay in the swap.
“We are exchanging assets in Boston and San Francisco, where we have robust development pipelines, into Southern California at a time when the region’s fundamentals are in the early stage of a recovery,” said AvalonBay Chief Executive Bryce Blair.
There’s still some time before that recovery kicks in, according to a new apartment report released this month.
Rents and vacancies in Orange County are expected to remain essentially flat through 2012, according to the 2011 Casden Multifamily Forecast from the University of Southern California Lusk Center for Real Estate.
Rents here average about $1,475 per month, according to the Casden forecast.
AvalonBay now owns about 2,300 apartments in OC, and has a project in the works in Irvine.
UDR owned 14 properties in the county, totaling 4,479 apartments, at the end of 2010. That portfolio was about 95% occupied at year’s end.
UDR executives said the company had an “overweight exposure in Southern California,” which prompted the swap with AvalonBay.
Medical Condos Sell Out
Odyssey Medical Center, a 51,000-square-foot medical condominium project in Irvine that broke ground in 2008 and later fell into foreclosure, has sold the last of its 32 units, according to brokers with the Newport Beach office of Grubb & Ellis Co.
Grubb helped First Community Bank sell the final 24 units at the two-story project near Hoag Memorial Hospital Presbyterian’s new center in Irvine.
Lake Forest-based Odyssey Medical Center LP developed the project.
A total of 19 owner-users accounted for the sale of the final 24 units, which brought a total of $9.3 million, or about $248 per square foot. That’s in line with other recent medical condo sales in the area, according to Grubb’s Dave Kluver, who represented First Community Bank in the deals. Greg Puccinelli and Nick Carey from Grubb & Ellis also worked on the sales.
During 2010, the asking price for medical office buildings averaged $251 per square foot, while the asking price for buildings under 10,000 square feet averaged $302 per square foot, according to the brokerage’s data.
KBS Takes Atlanta Office Complex
An investment offshoot of Newport Beach’s KBS Realty Advisors has taken ownership of a distressed Atlanta-area office complex.
The company’s KBS Strategic Opportunity REIT Inc. recently gained control of Northridge Center I & II. The two buildings total about 189,000 square feet.
KBS had purchased a non-performing first mortgage loan tied to the building in December for $7.1 million, or about 55% of its face value. Bank of America Corp. sold KBS the loan on the building, which previously was purchased through a tenant-in-common deal that had gone sour.
At the time the deal was made, KBS said it didn’t expect the mortgage to perform in accordance with its contractual term. The buildings were in the midst of losing key tenants, bringing occupancy at the complex below 50%.
Late last month, KBS received a deed-in-lieu of foreclosure on the property, giving it ownership. KBS said in regulatory filings that it didn’t intend to make significant renovations or improvements to the complex in the near term.
The Northridge deal was one of two distressed loans that KBS’ Strategic Opportunity fund owned at the end of 2010, totaling about $13 million. The fund has raised more than $50 million to date, which largely will be used to buy more non-performing real estate loans.
Other funds run by KBS remain busy buying higher-end properties with good occupancy rates. In West Palm Beach, KBS recently closed on the City Place Tower, an 18-story office building totaling 295,933 square feet.
The building, built in 2008 and 86% leased, sold for $126.5 million, or about $427 per square foot.
