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MIAMI BEACH, FL-In a deal pointing to a larger trend in the real estate market, a $181 million portfolio of B and C level apartments owned and operated by Fifteen Group of Miami was recapitalized by CMS, a Philadelphia based investment fund. CMS invested approximately $29 million, replacing the equity and mezzanine capital of Credit Suisse First Boston.

The $181 million portfolio includes 24 apartment communities totaling 6,868 apartment units, located across the U.S. in major metropolitan markets of Atlanta, Dallas, Houston, Miami, San Francisco, Sacramento, Tampa, Birmingham and others.

The deal, nine months in the making, was brokered by Herb Chase, Curtis Palmer and John Brown, all senior vice presidents with Grubb & Ellis Co.

Last month, Fifteen Group LLC, a nine-year-old, low-profile investment firm, bought out its partners in a recapitalization deal valued at $340 million.

“What we are seeing is that in times of economic volatility, like we are experiencing now, B and C apartment properties may prove to be a more stable investment,” said Chase in a prepared statement. “While B and C properties may not experience the rapid growth or command high rental rates, they do appear to have a more stable tenant base and offer less downside risk.”

Keith Misner, managing director of the Multi-Housing Investment Group with Grubb & Ellis agrees. “B and C level apartments usually have more blue-collar type residents who earn a modest, but steady income. They tend to remain residents for longer periods of time, which keeps tenant turnover and vacancy rates down. Renters in B and C level properties may hold off planned home purchases and remain in cost effective apartments longer, thus helping to strengthen demand,” he added.

According to Chase very attractive “cash-on-cash” returns on investment for the B and C apartments are available, between 12 and 16 percent, due to high levels of liquidity and historically low interest rates.

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