King of Prussia-based investor Morgan Properties has purchased 80 apartment complexes from a Rochester, N.Y.-based company whose management was charged in federal court this year with orchestrating a $500 million mortgage fraud scheme.
The sale between Morgan Properties and Morgan Communities on Friday afternoon adds about 15,000 apartments to the portfolio of Morgan Properties, its management said, with many of the complexes clustered in Upstate New York. The rest of the properties are in Pittsburgh, Harrisburg, Memphis, Chicago, Cleveland, and Huntsville, Ala. As part of the deal, Morgan Communities also transferred more than 750 of its employees to Morgan Properties. Although they have similar names, the two companies are not related.
Morgan Properties declined to state how much the company paid for the complexes but said in a statement that it had bought $3 billion worth of homes this year “and remain[s] bullish on multifamily fundamentals.”
Kate Wilhelm, a spokesperson for Morgan Properties, said the firm, headed by Mitchell Morgan and his sons Jonathan and Jason, took over Morgan Communities’ operations and property management in July.
In May, Morgan Communities’ chief executive, Robert C. Morgan — arguably the most prolific developer in Upstate New York — was charged in a 114-count indictment in the Western District of New York. Five others were charged in the alleged scheme. Charges included wire and bank fraud, money laundering, and conspiracy. Three employees have pleaded guilty.
The U.S. Attorney’s Office in Buffalo alleged that the group falsified financial statements and inflated the incomes of dozens of its apartment complexes to get larger loans from lenders for more than six years. A loan nearing $46 million for the Rochester Village Apartments at Park Place in Cranberry Township, Pa., north of Pittsburgh, was the largest amount that Morgan Communities fraudulently received, federal authorities said.
To dupe lenders, authorities said, the scheme involved staging apartment complexes to look more occupied than they actually were by placing shoes and welcome mats outside homes.
With the 80 new complexes, Morgan Properties says it now owns a total of 75,000 housing units in 15 states.