Centerspace sold nine properties in Minnesota and Nebraska to five different buyers for $144.3 million on March 16.
With these transactions, the Minot, North Dakota-based REIT reduced its leverage and increased the weighted average maturity of its debt obligations. The company took on the increased debt by buying the 215-unit Lyra Apartments in Centennial, Colorado, for $95 million last October.
“We incurred that debt in order to enhance our Denver portfolio with a brand new asset and a great submarket,” incoming Centerspace CEO Anne Olson told Multifamily Dive.
Centerspace’s recent sale included:
- Four communities comprising 692 units in the St. Cloud, Minnesota market.
- Two communities totaling 498 units in the Omaha-Lincoln, Nebraska market.
- Three communities with 377 units in the Minneapolis-St. Paul metro.
With the sale, the company now has 13,498 units in Colorado, Minnesota, Montana, Nebraska, North Dakota and South Dakota. Olson said the company traded out of these older properties after it deployed the money in a newer community in Denver.
"This is another step in our strategy to boost the quality of our homes, earnings power of the company and flexibility of our balance sheet," said Mark Decker, current Centerspace president and CEO, in a press release announcing the sale. "The continued demand for affordable housing options in our markets made this an attractive time to sell these communities and improve our company."
Strong reception
Although the apartment sales market has slowed dramatically, Olson was pleased with the market reception. “We had a tremendous amount of interest in the portfolio,” she said.
Part of the properties’ appeal to investors was that they are the types of assets that the government agencies want to finance. “These transactions fit a lot of the mission-driven lending by Fannie and Freddie around more affordable housing,” Olson said. “Our buyer pool had good relationships that they could leverage to get good financing rates.”
The properties were sold at a price appealing to individual investors. “There's still a huge appetite for individual owners to buy one building, particularly if it's under $10 million or $15 million,” Olson said. “Those are long-term owners that aren't necessarily dissuaded by the sudden spike in interest rates.”
Olson said a lot of groups toured the properties during the sales process, and about one-third of these visitors ended up putting in competitive bids. Three or four groups were in the best-and-final offer process for the properties.
“We are really happy with how they transacted,” Olson said. “I don't think that the same depth of buyer pool is there at those levels in Class A, hot markets with a lot of supply. Those are much tougher to finance right now.”
Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.
