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Sule Aygoren Carranza is managing editor of Real Estate Forum and editor of Multi Housing forum, from which this article is excerpted.

Washington, DC—A joint venture of Federal Capital Partners and New York City-based real estate investment fund Angelo, Gordon & Co. sold and recapitalized a five-property portfolio valued at $405 million. Lacey I. Rice, a partner with locally based Federal Capital, says the communities represent about 35% to 40% of the firm’s multifamily holdings and exemplify its business strategy.

“As opportunistic, value-add investors in the Baltimore-Washington, DC area, we try to purchase class B and class C properties that are under-managed or undercapitalized,” Rice explains. “Our goal is to aggressively transform the physical condition of the property, the management and its image in the market. We typically try to find properties that are in improving submarkets. Fortunately, in this market, there are a number of areas that are going through favorable transformations. And we frequently play an active role with county and community organizations in efforts to accelerate the renaissance of specific submarkets.”

The properties were in Federal Capital’s portfolio the past two to four years. Rice tells Multi Housing Forum the firm was initially considering a sale of all five assets, but determined it still had the opportunity to add value through additional renovations on two of the communities. “We were fortunate enough to find an institutional investor that shared our vision for the properties and was interested in participating in a joint venture structure,” he says. “We’re going to continue our program of unit renovations and common area improvements, and look into maybe trying to improve their position in their respective submarkets.”While he would not disclose the identity of the new equity partner on those two assets, he did say it was an overseas financial institution.

The executive also would not discuss the financial specifics of the deals that flipped the three other assets, but termed them “successful.” Those garden-style communities are the 732-unit Seasons at Bel Air, built in phases between 1971 and 1982 at 955 Sablewood Rd. in Bel Air, MD. Located near the Aberdeen Proving Grounds, part of the government’s Base Realignment and Closure Act in 2005, the property has undergone a $1.5-million renovation program, including entry refurbishment, landscaping, in-unit upgrades and systems improvements. Cooper’s Crossing is a 727-unit property built in 1966 at 4023 Cooper Ln. in Hyattsville, MD. It received $7.5 million in renovations, including a new clubhouse and leasing center, new swimming pool, upgraded landscaping, kitchen and bath renovations, building entry renovations and plumbing and mechanical system improvements. The third asset, Henson Creek, consists of 450 units at 3466 Brinkley Rd. in Forestville, MD. Built in 1965, its renovation program included $4.5 million in such improvements as the addition of a new community signage package, facade work, redeveloped recreation center and pool, new windows, paving, and kitchen and bath renovations.

The CB Richard Ellis team of Bill Roohan, Mike Muldowney and Andy Boyer brokered the sale. The identity of the buyer was not disclosed by Federal Capital, but Real Capital Analytics reports it is the Bethany Group, a private, local player. RCA also notes that the portfolio pro forma cap rate was 4.4%, and pegs the purchase price of the communities as follows: Seasons at Bel Air, $79.2 million or $108,197 per unit; Coopers Crossing, $73.7 million or $101,417 per unit and Henson Creek, $52.5 million or $116,556 per unit.

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