Two of the biggest apartment landlords based in the Philadelphia area are betting on Washington, hoping the federal government and the contractors who depend on it will weather the budget battles that have lately depressed hiring and rents around the capital.
Morgan Properties, the King of Prussia firm headed by Temple University and Republican Party donor Mitchell Morgan, says it has bought the 620-unit Northampton Apartments in Largo, Md., in partnership with DRA Advisors L.L.C., of New York. The seller was Equity Residential, of Chicago, and the price was not disclosed.
"It was our second acquisition of this year in the Maryland-D.C. corridor," said Jonathan Morgan, the firm's director of acquisitions and capital markets and son of the founder. In January, Morgan bought the 800-unit Chesapeake Glen in Glen Burnie, Md., also with a partner. Morgan also says it has invested $10 million to upgrade Northwest Crossroads of Randallstown, Md., as it prepares to boost rents.
Overall,: we have acquired approximately 3,400 over the last 18 months, of which 2,000 units are comprised of the Maryland-D.C. market and over 1,200 units in Philly," Jonathan Morgan said.
There has been a recent glut of high-end Washington apartments, but the Morgan firm concentrates on housing working people, who don't have as much to choose from. Older apartments with "captive" renters can still be purchased at a big discount to the cost of new buildings, he said.
"We are planning for the long term," Jonathan Morgan said. "When you can lock in fixed low-interest-rate financing and buy right, you'll do just fine."
Lubert-Adler, the Philadelphia-based partnership of Ira Lubert and Dean Adler, which controls real estate worth more than $16 billion, says it has "amassed" 20,000 apartments in 70 complexes, worth $2 billion, mostly since early 2012. The firm believes it can boost rents more easily for apartment dwellers than for offices, stores, or other weak real estate markets.
Recent Lubert-Adler buys include Hunting Point, south of Old Town Alexandria, Va., in partnership with Laramar Group, with offices in 25 markets, for $78 million, or $147,000 per unit, from the State of Virginia. The state bought and wrecked part of the complex to expand the Woodrow Wilson Bridge.
Renovations lagged under state control, and rents were "30-40 percent below market rate," Lubert-Adler said in a statement. The firm pledged $14 million in upgrades as it gets ready to jack up rents.