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NEW YORK CITY-Tarragon Corp., based here, has contributed its interest in 14 rental apartments to Ansonia Apartments, an unconsolidated partnership that now has 23 complexes under its banner. It's part of Tarragon's strategy to dispose of substantially all of its real estate investment properties to focus on its core urban homebuilding business.

The 14 communities have a fair market value of $341 million and were exchanged for an additional interest in Ansonia. The transaction included $391 million of long-term, senior financing provided by GE Real Estate. The deal is one of the first mortgages originated under GE's new flexible fixed-rate product. The collateral for the loan is Ansonia's 5,631-unit portfolio of class A and B stabilized properties in Alabama, Connecticut, Florida, Georgia, Maryland, Tennessee and Texas, including Vintage at Madison Crossing.

Since 2003, GE has provided nearly $1 billion in financing to Tarragon. According to Ed Coco, GE managing director, Eastern region, North America debt, says the commitment has the potential to grow to as much as $1 billion. After repayment of $148 million in consolidated debt, the transaction's first phase will generate approximately $64 million in net cash proceeds for Tarragon. This distribution from Ansonia will produce approximately $60 million in pre-tax income for Tarragon. Smaller second and third phases of the Ansonia financing are expected to contribute additional earnings and cash proceeds in excess of $30 million over the next 90 days, according to Tarragon officials.

The transaction is the largest of several expected to close over the next 90 days. This year, Tarragon has sold or contracted to sell 24 properties for $229 million and has more than $100 million of additional sales in negotiation or actively being marketed. There are eight remaining apartment rental properties in its portfolio that are scheduled for conversion to condominiums over the next three years. Four of these have already begun and the others are expected to begin over the next 18 months.

William S. Friedman, Tarragon chairman and CEO says that although the company has no capital invested in Ansonia, it expects it to be an important source of future value, earnings and cash flow for Tarragon and its shareholders. "The financing obtained is flexible and expandable so that Ansonia will be able to actively manage and expand its 6,000-unit rental apartment portfolio, adding additional properties including newly developed rental apartment communities from Tarragon as well as others."

Tarragon's capital redeployment strategy for its rental assets started in March. For previous coverage, click here.

Instant Insights /

GlobeSt.com UPDATE: Disposition Pushes Tarragon's Capital Redeployment

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