GE Commercial Invests in $85M Kor Portfolio

The investment fits into the overall GE investment strategy for a number of reasons, Garner explains. "The properties offer a clear value-creation opportunity in capturing the mark-to-market in rents because a number of the leases haven't caught up to current market levels," he says, adding that the properties also have potential to be upgraded through renovations to common areas and individual units. Garner says that GE Commercial likes the local apartment market for its infill nature, the large difference between rental costs and home prices, the projected population and job growth for Los Angeles, and the superior performance of L.A. apartments in comparison with properties in secondary and tertiary markets. The transaction was a direct deal between principals. Scott Lee, senior relationship manager at GE Commercial Finance Real Estate and manager of the Kor Group relationship, notes that in addition to fitting GE Commercial's strategic objectives, the investment will "contribute to the ongoing revitalization" of Koreatown and Hollywood. The GE-Kor portfolio consists primarily of one- and two-bedroom apartments and studios that were built from 1970 to 1990 and range from about 400 sf to 950 sf. The deal was burdened with disadvantageous CMBS debt that left it only about 50% leveraged, Garner says, but the transaction appealed to GE Commercial because it was able to price the debt at levels that will provide a return that meets the company's expectations. The joint venture plans to re-leverage the portfolio eventually and "will probably market a couple of the buildings within the first year of ownership," Garner says.