When MLG Capital first looked at Lowry North as a potential acquisition opportunity last year, it figured it would purchase the 192-unit property in Denver through a traditional fund structure.
However, as the Brookfield, Wisconsin-based apartment owner started to review the deal, it saw that the property’s ownership group was amenable to a different structure. Instead of selling, the entities that owned the property, Lowry North-Wildcreek LLC and Lowry North Property LLC, were interested in participating in the property’s future profits.
“It actually made more sense to have them contribute that deal to our legacy fund, which is our evergreen fund, and they can still participate in that fund into the future,” said Mitchell Faccio, senior vice president at MLG Capital. “We didn't see it on the front end that it was going to be the fit for them because we just didn't know them. But once we got into the best and final rounds, we realized they were perfect candidates for that.”
New York City-based commercial real estate services firm Berkadia negotiated the $51 million transaction. MLG built the legacy fund to compete with tax-motivated buyers like Delaware Statutory Trusts and umbrella partnership real estate investment trusts, according to Faccio.
“It’s for owners who need tax-deferred solutions that aren’t 1031 exchanges, DSTs or UPREITs,” Faccio said. “They want something that gives them a little bit more flexibility.”
Multiple attractions
Lowry North, built in 2002, has 66 one-bedroom, 96 two-bedroom and 30 three-bedroom apartments. Rents range from $1,600 to $2,700. The property’s amenities include a pool, hot tub and fitness center.
Since the property has been well cared for, MLG won’t need to focus on general upkeep. “We can focus on amenities instead of deferred maintenance,” Faccio said.
Another attraction for MLG was the work the previous owners had done at the property during its ownership tenure.
“If you went on site, you could tell that the owners had put a lot of money into the property and maintained it really well,” Faccio said. “We are trying to provide good housing for people. So seeing that the previous owners had a similar mindset in how they maintained the property, it made it easier for us to go in.”
Location was another appeal. The community sits near the Lowry Town Center and Denver International Airport.
“It was close to the city along some major thoroughfares and there have been a lot of positive developments on the retail side as well as the single-family housing side just to the south of the property,” Faccio said. “So we liked that there was growth happening in the market.”
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