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(Read more on the debt and equity markets and the multifamily market .)

LOS ANGELES-Fountain Management has lined up $28.8 million in loans and preferred equity to acquire and reposition 264 apartment units in West Covina and San Pedro, according to George Smith Partners, which arranged the financing. Fountain plans to take the properties through extensive rehabilitations, according to Steven Orchard, a vice president at George Smith, who calls the two properties “excellent value creation opportunities.”

Orchard says that Fountain will rely on its hands-on management expertise to make an immediate impact on the properties. According to Greg Worchell, principal at Fountain Management, the acquisitions are part of a continuing expansion strategy at the firm, which owns and/or operates almost 1,000 units in Southern California.

The 264-unit portfolio includes the 165-unit, two-building Parkwood Apartments at 1935-1945 E. Garvey Ave. in West Covina and the 99-unit, three-building Bayside Terrace seniors apartment complex at 860 W. Fifth St. in San Pedro.

Orchard notes that financing the deals as a cross-collateralized portfolio created scale and diversification to significantly improve leverage and returns. He arranged the financing for Fountain along with vice president Joshua Roseman and assistant vice president Kaleb Keller of GSP.

Financing for the Parkwood property included a $14.1-million bridge loan and approximately $3.2 million in preferred equity, while financing for the Bayside deal included a $9.5-million bridge loan and approximately $2.1 million in preferred equity. Both are non-recourse senior bridge loans at 80% of total project costs.

The Parkside property operates at full occupancy in an underserved apartment market, where Fountain Management plans to take the non-rent controlled property through an extensive repositioning in order to capitalize on rent growth. According to Orchard, a substantial cost disparity exists between single-family homes and apartment units in West Covina, bolstering demand for rental properties.

Bayside Terrace operates at 100% occupancy in any underserved senior housing market where the rent-controlled property is well positioned for low-risk rent growth due to high demand and its favorable location near medical facilities. Fountain plans to reposition the property by improving management, adding tenant-appropriate services and amenities, renovating common areas and upgrading unit interiors.

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