Archstone Sheds 352-Unit Dallas-Area Complex for Roughly $20M

Archstone-Smith isn't discussing the class A sale and little is being said by the parties who put it together. With Aetna at its side, Gould Investors LP of Great Neck, NY, scooped up a 93%-leased development at 4100 Morris Rd. and 1777 Timbercreek Rd. in Flower Mound, a Dallas-area bedroom community that's kept a tight rein on multifamily development.

Gould financed the acquisition with a $15.5-million loan and more than $5 million of Aetna equity. Joseph N. Hevey Jr., managing director in Dallas for Holliday Fenoglio Fowler, arranged the financing through Prudential Mortgage Capital Co. of Newark, NJ, which bundled a seven-year loan at a 5.22% fixed-rate interest. The loan-to-value ratio is part of the off-limits information. However, Denton County tax records show the complex, positioned on 26.7 acres, is assessed at $13.5 million, a solid indication that offers were plentiful and prices steep for the high barrier-to-entry property. Records show the deed is held by Security Capital Pacific Inc., in care of Archstone.

Hevey tells GlobeSt.com that Gould's plan for an "intermediate hold" eliminated opportunity funds from the equity prospects. "It was important that we matched up a patient equity player with this borrower," he says. The challenge, he says, was meeting the 60-day requirement to find an equity partner, raise the required fixed-rate first mortgage debt and close the deal for the JV, TRidge Apartments LP. Brokering the sale for Archstone was Cushman & Wakefield's multi-housing team in Dallas, Don Ostroff and Will Balthrope, both senior directors, and Susie Kakos, associate director.

Archstone bought Timber Creek's first phase in 1994 with roughly 15 extra acres, which were built out in 1998. The 21-building development contains one-, two- and three-bedroom units, averaging 870 sf. Monthly rents range from $500 to $1,100. Noel Management Co. Inc. of Dallas, Gould's representative in Texas, will assume property oversight and leasing duties for the recently renovated asset.

In the past month, Archstone has upped the 2004 earning guidance, partly due to third quarter dispositions of its "non-core" assets and those of a wholly owned subsidiary. Ameriton Properties Inc. In Q3, Archstone sold $591 million assets with 4,871 apartments, many to condo converters at premium prices. At the same time, Ameriton sold $211 million of assets, totaling 1,494 units and another $93 million, with 566 apartments, previously acquired for re-sale after minor repositioning, according to an Archstone press release. The year-to-date total as of Sept. 29 was $790 million of assets for gross gains of about $102 million, GAAP gains of $155 million and an average un-leveraged internal rate of return of about 10.3%.

In recent days, Archstone dismissed talk it's negotiating to buy another publicly traded company. R. Scot Sellers, Archstone's chairman and CEO, says the active marketing of several non-core assets is to generate a special dividend for shareholders. And, there's more information to come in the following weeks, he says in the release.