American Realty Advisors Pays $100M for M-F Asset in L.A.’s Silicon Beach

By Gail Kalinoski, Contributing Editor

American Realty Advisors has added to its growing multi-family portfolio with the acquisition of The Millennium Del Rey, a newly-built luxury apartment community in Southern California, for nearly $100 million.

American, a Los Angeles-based institutional investment manager, bought the 196-unit complex in the Marina Del Rey/Playa Vista market from the developer, the Dinerstein Cos., for $99.5 million. Completed in June, the property is expected to receive a Gold LEED designation. The complex is just under 90 percent leased, according to Kirk Helgeson, executive vice president & executive managing director for investments at the firm.

“Given its quality and location, the lease-up pace has been strong and we anticipate it will reach stabilized occupancy soon,” Helgeson told Commercial Property Executive.

He said the firm has hired Riverstone Residential as the management company.

The apartment community, located in an area of Los Angeles nicknamed “Silicon Beach” for its high concentration of technology-related companies, features surfboard storage and a bicycle maintenance room. There is a fitness center with an open-air section overlooking a resort-style pool as well as a business center, dog yard and barbeque courtyards. The units offer high-end finishes and technology packages that include Apple TVs and Monarc Tree Systems, which allows control of lighting, thermostat settings, entertainment options and speakers.

Even though the firm was pleased with the amenities and unit interiors, it plans to upgrade the property’s exterior with additional lighting, expanded landscaping and improved signage.

“There was not much that required upgrading, but given our approach to asset management coupled with a long-term hold horizon for this asset, we identified various enhancements we could do to the asset to make it more desirable for our residents and improve its position in the market,” Helgeson told CPE.

American, which has over $6 billion in assets under management, has a diverse portfolio of core and value-add funds that include office, industrial, multi-family and retail properties.

Helgeson said the firm, on behalf of its clients, has nearly 8,000 units under management in 29 properties located in or near major markets. Of those, 19 properties representing more than 5,000 units are in the same portfolio as The Millennium Del Rey.

Jay Butterfield, the firm’s managing director for fund/separate account operations, said the portfolio containing the complex is a diversified core fund focused on stabilized income-producing office, multi-family, retail and industrial properties.

“The strategy for this portfolio is to provide our investors with returns reflecting the U.S. commercial real estate asset class, through assets that are located in strong markets that we view as innovation hubs and sources of strong growth with demand from employers in globally competitive industries, at a lower level of risk than the market overall,” he told CPE.

Helgeson said the firm always has a “healthy presence” in multi-family assets.

“Multi-family is attractive for our core funds over a long-term perspective given the current trend in demographics,” he said. “The large 18-34 age segment is having reduced long-term homeownership rates in favor of renting.”

Butterfield said the majority of the firm’s investments made on behalf of its clients “are direct equity and levered equity.” He added American also “seeks opportunities in originating indirectly with the best regional and local operators by providing preferred equity, mezzanine debt, senior debt and other structures where we can align our platform and expertise with talented local investors providing added value potential for our clients.”

Founded 26 years ago, American recently put a disclaimer on its Web site telling clients that it had no relationship to American Realty Capital Properties, Inc., the New York-based single-tenant net-lease firm that recently acknowledged accounting errors in its financial statements. Two top executives resigned in late October after the errors were made public by ARCP, and the U.S. Securities and Exchange Commission is expected to investigate.

Asked whether American had received calls because of the similarity in firm names, Butterfield told CPE: “We have received a few inquiries regarding the unfortunate coincidence of American’s name with this other real estate-related company, but have informed all our clients and their advisors personally to make sure there is no confusion.

“American Realty Advisors has operated under this name since the firm’s founding over two decades ago and we have had no serious concerns from our clients regarding the news related to other similarly named firms,” he added. “We are proud of the brand and reputation that our firm has in the marketplace and have no plans to change.”