Scanlan Kemper Bard Maps $98M Apartments for Condos

CORONA, CA-Scanlan Kemper Bard of Portland, OR and Griffin Investments LLC of Los Angeles have acquired the 628-unit Waterstone at Corona luxury apartments from PPC Baywood Venture LLC for $98 million, according to the principals in the deal. The new owners, whose purchase is part of a $500-million multifamily investment program targeting the Inland Empire, plan a phased conversion of the 40-acre property to condominiums.Waterstone was developed in 1988 and is divided into three gated sections. It includes 49 residential buildings, a leasing center, three swimming pools, six spas, a clubhouse, a fitness center and 1,248 parking spaces, including 614 covered and 110 with garages.The developers planned the project as condominiums, but the ensuing recession forced a change in strategy, so the complex was rented as apartments, says Robert Scanlan, founding principal of SKB. The SKB-Griffin joint venture plans to invest an additional $1.35 million into the property before selling groups of buildings to condo converters in stages over the next 60 months.Waterstone is the third acquisition in a partnership between SKB and Griffin that intends to build a $500-million portfolio of Inland Empire apartments over the next 12 to 18 months. The JV has already acquired the 192-unit Harbor Grand Apartments in Lake Elsinore and plans to buy two garden-style apartment properties in and around western Riverside and San Bernadino counties.The plan is to acquire the assets, improve their performance and, in approximately three to five years, sell the portfolio to an institutional investor, probably an offshore buyer. The goal is a weighted average investor IRR in the upper teens. Given the planned condo conversion, SKB and Griffin expect that Waterstone will not end up in the ultimate portfolio sale, but the property is expected to provide returns for investors above the stated goal.SKB and Griffin paid $23 million for the Harbor Grand Apartments, which at 192 units is the largest complex in Lake Elsinore. The JV's inaugural acquisition was its $36.5-million purchase of the 296-unit Copper Canyon Apartments and excess land located a few blocks from the University of California at Riverside.Griffin will oversee the on-site property management staff and day-to-day operations of the properties. SKB will act in an asset management role with Griffin to execute the business plan. Alex Mogharebi of Marcus & Millichap brokered both the Waterstone deal and the Harbor Grand sale.