Two of the Philadelphia area's biggest landlords are buying more Washington, D.C.-area apartments, in hopes of long-term federal government and contractor growth, despite recent overbuilding and government job cuts that have forced local rents there lower, as I noted in my Philadelphia Inquirer column May 1.(Use promotion code R55T to read if you're not already an online Inquirer subscriber.)
Morgan Properties, the King of Prussia firm headed by Temple U and national GOP donor Mitchell Morgan, says it's bought 620-unit Northampton Apartments, Largo, Md., in partnership with DRA Advisors LLC of New York, from Equity Residential, for an undisclosed sum. Morgan also says it's invested $10 million to upgrade Northwest Crossroads, Randall, Md., as it strives to boost rents.

"It was our second acquisition of this year in the Maryland-DC Corridor," Jonathan Morgan, director of acquisitions and capital markets and son of the founder, told me. "In January, we also acquired another 800-unit property with Dune Capital called Chesapeake Glen in Glen Burnie, also from Equity Residential." Overall, "we have acquired approximately 3,400 over the last 18 months, of which 2,000 units are comprised of the Maryland-DC market and over 1,200 units in Philly."
Lubert-Adler, the Philadelphia-based, Ira Lubert-Dean Adler partnership that controls real estate worth more than $16 billion for clients including the Pennsylvania state pension funds, says it has "amassed" 70 apartment complexes and 20,000 apartments apartments worth $2 billion, mostly since early 2012. Local holdings include 2040 Market St., the former AAA insurance building that Lubert- Adler's partner Ron Caplan is turning into high-end apartments, a few blocks east of Lubert-Adler's Cira Center headquarters.
Recent Lubert-Adler deals include the purchase of Hunting Point, south of Old Town Alexandria, Va., in partnership with Laramar Group, for $78 million, or $147,000 per unit, from the Virginia state Departoment of Transportation, which had acquired and then demolished part of the complex to expand the Woodrow Wilson Bridge to Washington.
Renovations had lagged under state control, and rents were "30-40 percent below market rate." Lubert-Adler has pledged "about $14 million" for new lobbies, hallways, "rooftop entertainment areas," mechanical systems, facade and pool imrpovements, and new kitchens, baths and other apartment upgrades, in hopes a nicer-looking place will justify higher rents. 
Why so many apartments? "We made a strategic decision, based on the belief that montly rental apartments provide one of the best opportunities" to boost profits, thanks to rising rents, in an environment where other real estate values aren't necesarily going up quickly, Lubert-Adler cofounder Dean Adler said in a statement. "We aimed for overall returns of 17-20 percent, with 10-12 percent of that target coming from current yield," as rents rise. Lubert-Adler targeted "one-off middle-market acquisitions" of apartments that were "too large for local operators but smaller than those that would interest the very large funds."
Similarly, Jonathan Morgan says his firm expects the "glut" of Washington apartments is more of a factor for new and high-end apartments than on Morgan's middle-income and working-class clients. "We are buying at a significant discount to replacement cost ," and "sticking to our niche," in markets where Morgan already has "a strong market presence and can generate economies of scale and operational efficiencies" by upgrading kitchens, baths and utilities and keeping rents below what the top apartment operators charge. "We have a captive audience of residents seeking to find a quality, viable alternative," he added. 

In short, "we are planning for the long-term. When you can lock in fixed low interest rate financing and buy right you’ll do just fine."