Behringer Harvard REIT Makes Another Big M-F Splash in California

By: Tonie Auer, Contributing Correspondent

Behringer Harvard Multifamily REIT I recently made what was then 2009’s largest California multi-family acquisition with an $80 million purchase of Waterford Place Apartment Homes near the Bay Area. This week, the REIT topped that with the $96 million purchase of another property—this time in Los Angeles.

The Gallery at NoHo Commons, a Class A, 438-unit luxury apartment complex located in the NoHo Arts District at the northeast corner of Chandler Boulevard and Fair Avenue in Los Angeles, was bought from owner SF NO HO L.L.C., a subsidiary of Fairfield Residential.

Originally developed through a public-private collaboration of the city of Los Angeles’ Community Redevelopment Agency and other local government agencies, The Gallery at NoHo commons will continue to operate in accordance with numerous owner participation agreements established with those entities. One agreement requires the owner of NoHo Commons to maintain 115 of the units at below-market rates as affordable housing for a period of 40 years, beginning in 2008, for which the CRA provides the owner with a housing subsidy in the form of annual payments for approximately $2 million to be paid through 2029. The CRA may accelerate the timing of some or all of the annual payments. After the housing subsidy has been fully funded, the owner must maintain the then-existing number of restricted units until 2048 without any subsidy payments from the CRA.

On Sept. 16, CPE reported that Behringer Harvard Multifamily REIT I acquired the Waterford Place Apartment Homes in Dublin, Calif., for $80 million. The 390-unit, 350,900-square foot luxury apartment community had a sales tag for $79.7 million, which represents $204,358 per unit and $225 per square foot.

“Long term, if you look at the demographics, population, employment centers and the diversity of industry, California is a very attractive place to be for the long term,” Jason Mattox, chief administrative officer for Behringer Harvard, told CPE. “It doesn’t solve the short-term recession that California and the rest of the U.S. is experiencing, but this is a great place for the long haul.”

Mattox said both complexes were attractive investments because they are located in large population centers with a population looking for this style of luxury, upper-tier apartment community.

“We see the benefits from buying now. Multi-family itself benefits from great demographics,” he said. “We’re seeing some of the largest graduating classes in our country right now, as well as a continued trend of baby boomers and empty nesters wanting a less hassled lifestyle. Those two things combine for an attractive base for multi-family investments. In the short run with the recession and other challenges in the economy, we’re able to identify very attractive properties at great pricing in this environment.”

Curtis A. Palmer, Herb S. Chase III and Peter Sherman, founding principals, along with Brad Pennington, vice president—all with Multi-Housing Capital Advisors, represented the sellers in the NoHo deal.