The REIT also acquired an option to buy a stake in the 3,221-unit San Francisco property along with development rights.
Apartment Investment and Management Co. (Aimco) has loaned $275 million to the partnership led by Maximus Real Estate Partners that owns Parkmerced Apartments, a rent-controlled, 3,221-unit apartment community in southwest San Francisco. In tandem with the deal, the real estate investment trust has also acquired a 10-year option to purchase a 30 percent interest in the partnership, which also has the vested right to develop 4,093 additional market-rate units.
Located on a 152-acre site at 3711 19th Ave., Parkmerced was completed by Metropolitan Life during World War II, around the same time as other landmark multifamily developments such as Peter Cooper Village/Stuyvesant Town in New York City. Maximus acquired the 47-building asset for $1.4 billion from Rockpoint Group in November 2011, equating to a price of $419,125 per unit. The deal was subject to a $450 million loan.
Maximus was advised in the recapitalization deal by Pat Hanlon at Ackman Ziff and Adam Spies and Douglas Harmon of Cushman & Wakefield. The transaction will enable Maximum to build nearly 2,000 new homes in the next few years, representing the first phase of a master plan that will turn Parkmerced into a sprawling mixed-use property with nearly 10,000 homes, 80,000 square feet of office, 230,000 square feet of retail, 64,000 square feet of amenities and a new elementary school.
The recapitalization values the asset, which is the largest apartment community in the U.S. by acreage, at $2.1 billion, a representative of Cushman & Wakefield told Multi-Housing News.
HUGE COMMUNITY TO GET BIGGER
Parkmerced is 96 percent occupied, according to Yardi Matrix. The existing homes are subject to City of San Francisco rent control, which limits annual rental hikes to 60 percent of the consumer price index for continuing occupancy. The rents are reset to market rate when units are vacated.
Under a development agreement with the city, the partnership and its affiliates are obligated to protect the rent-controlled status of the 3,221 units and have the vested right to develop 5,679 new market-rate homes as well as more than 300,000 square feet of neighborhood commercial space. The development rights for 1,586 of these units have been transferred to an affiliate.
Aimco’s loan accrues interest at 10 percent per annum and has a five-year term with the right to extend for an additional five years. The financing is structurally subordinate to a five-year, $1.5 billion loan secured by a first lien to the property for total debt of $1.775 billion, representing 85 percent of the property’s $2.1 billion appraised value.
The REIT said in a statement that it funded the loan through bank borrowing, which it expects to be repaid in the second quarter of 2020 from $275 million in proceeds from sales of apartment communities in California. Aimco’s option to acquire a stake in the partnership has an exercise price of $1 million, increased by 30 percent of future capital spending to carry out development and redevelopment of the community.
