Class B or Luxury, the Good Times Roll with MF

GAITHERSBURG, MD-Two multifamily properties have traded in Maryland's suburbs in recent days; they are Oakwood Gaithersburg, a 136-unit, 11-story luxury high-rise apartment community, which moved for $31.3 million and Chesapeake Glen, a Class B 796-unit multifamily apartment community located in Glen Burnie, MD, for an undisclosed price. The deals themselves are significant of course, illustrating the asset class' unending popularity. They also augur more transactions in the works.

Transwestern's Mid-Atlantic Multifamily Group co-directors Dean Sigmon and Robin Williams brokered the sale of the Oakwood Gaithersburg, which was acquired by Bernstein Management Corp. from Archstone. This transaction brought the group's sales to $500 million, from December 2012, Sigmon tells GlobeSt.com. It has another $50 million expected to close in Q1. For Q2, "our pipeline of listings includes 2,000 units, including one portfolio," he says.

Chesapeake Glen was acquired by a joint venture partnership between Morgan Properties and its equity partner, New York-based Dune Real Estate Partners LP. The seller was Equity Residential, represented by HFF. The company has a number of other deals pending with investment partners, Jonathan Morgan, director of Acquisitions at Morgan Properties, tells GlobeSt.com. "There is one deal with 600 units currently in the works for Maryland and we are considering other opportunities to make portfolio acquisitions."  The company intends to buy 5,000 units in the Mid-Atlantic market this year, he says.

Originally built in phases in 1973 and 1977 by the Artery Group, Chesapeake Glen underwent two renovations by Equity Residential.

Class B, in particular, is the company's designated sweet spot, Mitchell Morgan, founder and CEO of Morgan Properties, says in a prepared statement. "We feel that Class B is the right place to invest now since we have a captive audience and it generates significant yield."

Another reason the company likes Class B properties is because they are currently being ignored by institutional buyers in their rush to quality, according to Morgan.

"We target off-market opportunities to acquire large one-off transactions and portfolios of Class B apartments that require substantial equity commitments to limit competition from the local buyers and private owners," he says in a prepared statement.