Prime Group Buys 349-Unit Complex for $43M

The deal was one of the largest investment sales of the year in Orange County and "demonstrates our on-going interest in buying well-located, quality multifamily properties in coastal California," Adair says. He tells GlobeSt.com that being able to close quickly is one of the ways that the Prime Group differentiates itself in today's market, at a time when there is so much uncertainty in the capital markets and sellers are concerned whether potential buyers really have the equity and/or the access to debt to close a sale. He notes that the San Francisco-based firm has closed every one of the 37 deals it has contracted to buy in the past five years.

The Adagio, which is near the intersection of MacArthur Boulevard and Main Street in the South Coast Metro submarket, was built in 1974 and was renovated in 2000. The sale of the 349-unit complex is one of four multifamily transactions totaling more than $244 million that Eldridge and Jefcoat have completed in the past 60 days--representing the only 100-plus-unit apartment sales to take place in Orange County year-to-date. "In today's market, it can be very challenging to get a deal over the finish line for a variety of reasons," Eldridge says. "The fact that a transaction of this size closed in just 22 days demonstrates the importance of working with a consistent, motivated and reliable buyer."

Adair tells GlobeSt.com that Prime Group's capacity to close quickly assures  sellers that they "will have their money within 30 days, and a large non-contingent deposit within a week or so." In the acquisition of the Adagio, he says, the Prime Group was able to complete due diligence in six business days and close the acquisition nine business days later, thanks to the cooperation between the seller and CB Richard Ellis. CBRE and Prime Group declined to disclose the seller, but GlobeSt.com reports on previous sales and financing of the property indicate that the seller was BlackRock.

The Adagio previously sold in late 2000 for $42.3 million, according to a GlobeSt.com report at the time. Adair says the Prime Group's acquisition of the complex illustrates that, even in a marketplace where the volume of sales is down sharply, "Sellers can get a very quick execution and a great deal of certainty if they meet the market."

While the bid-ask gap is much discussed as one of the reasons for the decline in transaction volume, Adair says that a sufficient number of transactions are closing to establish what the market is. "If you want to sell, the bids will tell you what the values are," he observes. He says that sellers who have good business plans and "who are able to be rational about whether it's better for their business to own the property or have the cash that the market will give them" are getting deals done.

The Prime Group represented itself in the acquisition of the Adagio, which was 92% occupied at the time of the sale. Its 349 units configured in 22 one- and two- story buildings, and the property is in good condition from its renovation in 2000, which was "substantial and comprehensive," Adair says.

The Prime Group plans to hold the Adagio for the long-term, which in general is its business plan for all of its acquisitions. Adair points out that the company has never sold an apartment building that it has bought in coastal California in the past 20 years and that coastal California apartments are its favorite acquisition target, although in general it likes properties in the major Western US markets, where it owns assets in six states.