Optimism Rings in 2010

Optimism Rings in 2010
By: Nicholas A. Dunlap, CPM

Ah, nothing like a little optimism to end the year. Behringer Harvard, a large REIT (Real Estate Investment Trust) has completed the acquisition of The Calypso Apartments and Lofts. The Calypso is a 177 Unit apartment complex in the city of Irvine, originally built as for-sale condominiums by Shea Homes. The property traded hands for an undisclosed amount and marks the second transaction by the Texas based REIT this month. Earlier in December, Harvard Behringer closed on the 140 Unit Redwood Lofts in the city of Marina Del Rey.

Harvard Behringer’s COO Mark Alfieri believes in the Southern California marketplace and specifically the Orange and Los Angeles county areas as the high cost of for sale housing makes for attractive rent growth and value appreciation with regard to their rentals. According to Harvard Behringer, Orange County will receive the strongest recovery in apartment values, rents and NOI of the areas the firm tracks.

With The Calypso and Redwood Lofts, Harvard Behringer has acquired two high-end, luxury-type properties with the ability to generate cash-flow during their holding period or operate the property over their holding period with the potential individual sale of the units as a possible exit strategy. In such a turbulent market, properties with such characteristics are uncommon and truly a trophy find.

Harvard Behringer will likely struggle to achieve their desired rents and be forced to introduce an array of concessions to boost occupancy, but such issues are seasonal if not temporary in this cyclical business.

Happy 2010 to All.