LOS ANGELES-Watermarke Properties Inc. of Corona, CA hasacquired a newly built, 214-unit apartment tower at 705 W. NinthSt. from Meruelo Maddux Properties for $109.5 million in anall-cash, direct deal between buyer and seller that is Watermarke'ssecond major apartment acquisition in Los Angeles within a week.Peter DiLello, director of acquisitions for Watermarke, tellsGlobeSt.com that the company has renamed the 35-story projectWaterMarke Tower, has started a lease-up program and planssignificant enhancements to the amenity package at the property,which was vacant at the close of escrow.

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The WaterMarke's 214 units consist mainly of one- andtwo-bedroom apartments, along with four penthouses, all atop asix-story parking structure, with a 6,800-square-foot commercialspace that is slated for a high-end restaurant. Meruelo Maddux,which is in Chapter 11 bankruptcy, initially planned the project asa condominium tower and later switched it to an apartmentdevelopment when the condo market stalled.

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DiLello cites the uniqueness of the WaterMarke Tower and thestrength of the Downtown L.A. apartment market among the reasonsthat Watermarke Properties bought the project. "There is reallynothing else like it" in the market, he says, pointing out that theproperty is in the heart of Downtown, close to venues like StaplesCenter and L.A. Live, and across the street from a Ralphssupermarket, the only one in Downtown L.A. In addition to itscondo-quality construction and a long list of amenities, DiLellosays the apartment tower offers "views that you have to see toappreciate." He estimates 12 to 18 months for the lease-up, whichis being managed by Riverstone Residential.

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DiLello describes the WaterMarke as "a core asset in a corelocation" for Watermarke, which is a privately held and internallyfinanced company that is seeking institutional grade multifamilyproperties in Southern California. The company, which closed on theWaterMarke within 48 hours of its $48 millionacquisition of a 159-unit complex in the WilshireCenter/Koreatown district, is a long-term investor, typicallyplanning to hold its properties for 10 years or more. "We believein buying properties in core areas, so that when the recovery doescommence, those are going to be the first areas to recover,"DiLello says.

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The Downtown L.A. rental market has remained strong despite theeconomic downturn, according to apartment broker Tom Moran Jr., adirector at the Costa Mesa, CA office of Chicago-based Moran &Co., which has studied the Downtown market closely. Moran, who wasnot involved in the WaterMarke Tower deal but is familiar with boththe property and the Downtown market, tells GlobeSt.com thatDowntown L.A. has been absorbing an average of 165 to 170apartments per month since 2008, a pace that he calls "phenomenal"considering the economy.

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Moran says one reason for the strong absorption is the ratio ofjobs to residents in Downtown Los Angeles: 450,000 to 40,000, or11-to-one. That compares with ratios of about 3.2 jobs per residentin other large West Coast cities. "We have a huge demand for rentalunits downtown, but not a lot of housing stock, even with all ofthe adaptive reuse and new construction during the boom," Moransays. "This makes Los Angeles very appealing both for residents andfor investors."

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Moran's research indicates that―even with the 2,400units of market-rate apartments delivered in 2008, 800 delivered in2009 and up to 1,000 this year―"By the fall of this year,all of those units will have been absorbed and the occupancy willbe stabilized, with nothing on the horizon for development," hesays. The figures include adaptive reuse and newly builtmarket-rate units, as well as condo projects converted toapartments, like the WaterMarke.

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Moran describes the WaterMarke as "very rare" for its size,quality and location in Downtown L.A., and also that it is newconstruction rather than a conversion of an existing building. Thenew tower is part of a Watermarke Properties portfolio ofmultifamily, office, industrial and single-family properties thatreflects the company's diverse investment strategy, DiLello says,although the company's primary focus right now is on multifamilyacquisitions in Southern California. The company has closed on morethan $650 million in transactions, all-cash, in the last 36months.

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