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NORTH HOLLYWOOD, CA-In one of the largest multifamily transactions in Southern California this year, Behringer Harvard Multifamily REIT I of Dallas has acquired the 438-unit Gallery at NoHo Commons complex for $96 million. The sales price was not disclosed in the REIT’s announcement of the deal, but in a public filing Behringer Harvard said that “The total purchase price for NoHo Commons, exclusive of closing costs, was approximately $96 million and was paid entirely with proceeds from our initial public offering of common stock.” The REIT says that it may later place mortgage debt on the property.

Behringer Harvard acquired the complex from SF NO HO LLC, a subsidiary of Fairfield Residential. The seller was represented by Curtis A. Palmer, Herb S. Chase III and Peter Sherman, founding principals, along with Brad Pennington, vice president of Multi-Housing Capital Advisors.

The Gallery at NoHo Commons, which was completed in 2007, is situated on a 5.3-acre site at 5416 N. Fairview Ave., which is adjacent to the North Hollywood Metro Station. The complex is located in the heart of the NoHo Arts District, a 743-acre redevelopment initiative supported by the City of Los Angeles’ Community Redevelopment Agency. It was approximately 88% occupied as of Sept. 13, according to Behringer Harvard’s public filing.

The complex consists of five four-story buildings with amenities including a resort-style swimming pool and spa in a landscaped plaza, a fitness center, a business center, a social lounge and a recording studio. Two five-story parking garages provide a total of 778 spaces.

Mark T. Alfieri, chief operating officer of Behringer Harvard Multifamily REIT I, describes the complex as “a high-quality, stabilized multifamily community.” He says the REIT was “attracted to this opportunity to acquire an outstanding asset at a value well below replacement cost.”

Behringer Harvard’s public filing says that the operation of NoHo Commons is governed, in part, by a number of agreements with the City of Los Angeles and other local government agencies, including an owner participation agreement with the California Redevelopment Agency that the REIT assumed in connection with its acquisition of the asset. The agreement requires the owner of NoHo Commons to maintain 115 of the units at below-market rates as affordable housing for a period of 40 years, beginning in 2008.

In return for maintaining the affordable units, the CRA provides the owner with a housing subsidy in the form of annual payments of approximately $2 million to be paid for 21 years, beginning in 2008. The CRA has the option to accelerate the timing of some or all of the annual payments. After all of the housing subsidy has been funded, the owner must maintain the then-existing number of restricted units until 2048 without any subsidy payments from the CRA.

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