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Trion Properties Acquires $28M OR Community

After purchasing three Oregon properties for $24.2 million in April, Trion Properties has acquired Pacific Crest, an apartment community in Portland’s submarket of Tigard, Ore., for $28 million. This marks the firm’s 10th investment in the area within the last three years, bringing its portfolio to 700 units. Continental Partners arranged an $18.4 million loan at a starting rate of 3.9 percent to finance the acquisition.

“We remain focused on the Portland metropolitan area due to its long-term growth and the establishment of several major employers in the region, which has gained a reputation as the ‘Silicon Forest,'” said Max Sharkansky, managing partner of Trion Properties, in a prepared statement. “Tigard in particular continues to be one of the strongest performing markets in the greater Portland area, with Washington County having the highest median household income in the state. The city’s solid economic fundamentals and high quality of life are driving resident demand for housing in this market, resulting in long-term growth potential for multifamily investments.”

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Multifamily Investors Are Shifting Gaze To East Bay

The tightening availability of investments and the lack of upside potential are turning multifamily investors away from urban cores and pushing them to emerging gateways such as the East Bay, Paskover says in this EXCLUSIVE.

OAKLAND, CA—Trion Properties is bullish on multifamily investment in the East Bay market, acquiring five properties in the area in the past two years. In this exclusive, Mitch Paskover, managing partner of Trion Properties, recently discussed increasing investor interest in East Bay multifamily properties and why investment in this market is a smart bet...

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Value-Add Player Trion Properties Bets Again On Beaverton

Trion Properties, a private equity real estate firm that specializes in value-add multifamily on the West Coast, has acquired Hallwood Apartments, a 76-unit apartment community in Beaverton, for an unspecified price.

The buyer plans renovations to upgrade both the exterior and interior of the property, which is fully occupied.

The deal comes not long after Trion's acquisition of Bel Aire Court, also in Beaverton, bringing its total holdings in the region to more than 358 units, according to Trion Managing Partner Max Sharkansky.

“This is our third acquisition in the city, which is just a few miles west of Downtown Portland and poised for growth," Sharkansky said. "Beaverton is in Washington County, which is projected to see a population increase of 42% over the next 20 years.”

The market's attraction is more than just raw population growth, Sharkansky said.

"With many major companies based out of the region, or expanding into it, there's an increased demand for multifamily housing to support employment growth."

Nike’s HQ in Beaverton, for example, is undergoing a expansion estimated at nearly $1B, which will include six new buildings and 3.2M SF of new office space.

Developed in 1986, the garden-style Hallwood Apartments includes one- and two-bedroom units featuring washers and dryers in each unit, a swimming pool, covered parking and an on-site leasing office.

Trion Properties Purchases Fifth Bay Area Property In Less Than Two Years

Trion Properties acquired an 88-unit multifamily property at 4445 Stevenson Blvd. in Fremont for $26.5M. This marks the fifth Bay Area acquisition the firm has completed in less than two years, and its portfolio now includes 350 units, according to Trion Properties managing partner Max Sharkansky. It most recently acquired a complex in San Leandro in April.

The apartment community is less than five miles from Fremont’s 5.3M SF Tesla factory, which employs over 6,000 people, according to Sharkansky. The demand for housing will increase with Tesla’s 4.6M SF expansion that will add another 3,100 workers to the city. The BART extension from the East Bay into Silicon Valley will further drive demand for housing in the area.

“Fremont is centrally located in the East Bay and the northern part of Silicon Valley, a region that is experiencing tremendous growth,” Sharkansky said. “The market benefits from the expansion of the technology sector as companies are moving across the Bay into this submarket.”

Trion plans to renovate the property, built in 1966, with interior and exterior upgrades and rebrand the property from Americana Apartments to Parc 88. The interior will have faux wood plank flooring, quartz countertops, updated cabinetry and washer/dryer appliances added to each unit.

Exterior renovations will include new signage and landscaping on the property’s 4.4 acres of green space.

Following upgrades, units should cost $900 to $1K less than newly built apartment units and make it attractive to workers moving into the area, Sharkansky said.

Continental Partners arranged a $19.75M bridge loan for this acquisition and $10.75M of joint venture equity for the asset. NAI Capital Vice President Shivu Srinivasan represented Trion Properties, and Makras Real Estate President Victor Makras represented the seller, the Jones family.

Floating-Rate Loans: A Good Fit for Today’s Multifamily Market

In 2007, fixed-rate funding was the norm in multifamily finance as well as in other commercial asset classes. Only the pension funds, sovereign wealth funds and a few very large, institutional real estate companies made use of floating-rate loans. But the last five years have seen a change in the way multifamily real estate is financed. Although fixed-rate loans still dominate the market, private equity funds, smaller middle-market investors and even family offices now embrace floating-rate options when it is accretive to their investment strategies.

Multifamily Changes Favor Floating Rate

By 2009, rent growth had dropped into negative territory, according to the Federal Reserve, but when it recovered, it recovered robustly. Since 2012, multifamily rents have been growing about 3 to 4 percent per year. With rents rising at this rate, investors became more confident that they could realize the yields they sought in less time. The three- to five-year hold periods they could secure with a floating-rate loan provided a better match for their investment needs than a 10-year or even a seven-year fixed-rate. In effect, floating-rate financing enabled them to accelerate their investment cycle.

Floating-rate loans also provided multifamily investors with a solution to another post-recession challenge—the influx of new money that drove up valuations in many cities. The lower start rate of floating-rate loans—combined with the increasing availability of one to five years of interest-only payments—helped investors make their numbers work in ways that fixed-rate loans could not.

The Impact of Historically Low Interest Rates

As the recovery slowly unfolded, multifamily investors began to recalibrate their thinking about interest rates. Despite repeated predictions that interest rates would rise, rates stubbornly adhered to historic lows, giving investors confidence that when rates did finally rise, they would move slowly. Once the Fed began raising rates, the sentiment was confirmed.

In other words, during the recovery, investors who took out floating-rate loans paid interest rates that were, by historical standards, unprecedented. And as long as the 30-day LIBOR moved in a narrow band between 0.15 and 0.30 percent, as it did from July 2009 to November 2015, they paid these low rates for a sustained period of time.

Case Study: The Benefits of Floating Rate

L.A.-based Trion Properties’ experience with the purchase, refinance and subsequent sale of Sierra Village, a 1980s garden-style property in the Sacramento area, illustrates why investors have become such proponents of floating-rate financing. .

Trion is a classic value-added investor, using extensive renovation and lease-up tools to increase net operating income. Sierra Village met Trion’s objectives perfectly. The asset had been owned by a Texas-based operator who had purchased Sierra Village in a receivership sale. The rents were low, expenses high and occupancy rates below market.

Floating-rate loans figured prominently in Trion’s strategy. In January 2014, Trion purchased the property with a seven-year $7.4 million floating-rate loan at LIBOR plus 300 bps with two years of interest-only payments. Trion renovated the apartments and instituted cost control measures and other professional management practices. Eighteen months later, improved performance allowed Trion to refinance, this time with a seven-year $9.6 million floating-rate loan at LIBOR plus 230 bps with two years of interest-only.

In September 2016, Trion sold the property. During the 33 months it held Sierra Village, it had increased net operating income by approximately 70 percent and achieved an average of 98 percent occupancy. On closing, the project-level IRR was 58 percent, with an equity multiple of 2.71x. By contrast, a fixed-rate loan would have trapped their equity unless they opted for a supplemental loan, and the subsequent amortizing payments would have impacted cash flow.

As Trion’s experience illustrates, recent market conditions have favored the use of floating-rate loans, and as 2017 continues to unfold, they continue to be a popular option for investors. In a time of higher interest-rate volatility and slower rent growth, fixed-rate loans might make more sense. But one thing is certain: Having proved their worth during the recovery, floating-rate loans will remain part of the multifamily toolbox for the foreseeable future.

Small Developers Rely on Core Values for Growth

Trion Properties acquired an 88-unit multifamily property at 4445 Stevenson Blvd. in Fremont for $26.5M. This marks the fifth Bay Area acquisition the firm has completed in less than two years, and its portfolio now includes 350 units, according to Trion Properties managing partner Max Sharkansky. It most recently acquired a complex in San Leandro in April.

The apartment community is less than five miles from Fremont’s 5.3M SF Tesla factory, which employs over 6,000 people, according to Sharkansky. The demand for housing will increase with Tesla’s 4.6M SF expansion that will add another 3,100 workers to the city. The BART extension from the East Bay into Silicon Valley will further drive demand for housing in the area.

“Fremont is centrally located in the East Bay and the northern part of Silicon Valley, a region that is experiencing tremendous growth,” Sharkansky said. “The market benefits from the expansion of the technology sector as companies are moving across the Bay into this submarket.”

Trion plans to renovate the property, built in 1966, with interior and exterior upgrades and rebrand the property from Americana Apartments to Parc 88. The interior will have faux wood plank flooring, quartz countertops, updated cabinetry and washer/dryer appliances added to each unit.

Exterior renovations will include new signage and landscaping on the property’s 4.4 acres of green space.

Following upgrades, units should cost $900 to $1K less than newly built apartment units and make it attractive to workers moving into the area, Sharkansky said.

Continental Partners arranged a $19.75M bridge loan for this acquisition and $10.75M of joint venture equity for the asset. NAI Capital Vice President Shivu Srinivasan represented Trion Properties, and Makras Real Estate President Victor Makras represented the seller, the Jones family.

Read more at: https://www.bisnow.com/silicon-valley/news/multifamily/trion-properties-purchases-fifth-bay-area-property-in-less-than-two-years-79920?utm_source=CopyShare&utm_medium=Browser

Trion Properties Acquires San Leandro Apartment Property for $36.6MM

SAN LEANDRO, California (April 6, 2017) – Trion Properties, a private equity real estate firm with a niche focus on value-add multifamily investments, along with its joint-venture partner DVO Real Estate, a New York-based private real estate investment firm, has acquired Bel Brook and Hideaway Apartments, a 146-unit value-add multifamily property in the San Leandro submarket of the East Bay, for $36.6 million.

This is Trion Properties’ fourth Bay Area acquisition in less than 15 months, bringing its existing Bay Area multifamily portfolio to a total of 262 units, according to Max Sharkansky, Managing Partner at Trion Properties.

“San Leandro is thriving and experiencing tremendous revitalization, making it poised for long-term growth and investment potential,” says Sharkansky. “Located in the heart of the dynamic East Bay, this property is within walking distance to a BART station and a mile away from the San Leandro Technology Campus, a 750,000 square-foot mixed-use development which will bring an estimated 1,800 tech jobs to the area. The enormous job growth throughout this region is driving demand for quality housing located in close proximity to transit options and major employers.”

Sharkansky notes that the entire East Bay is undergoing rapid growth as major tech giants and employers expand their presence in this region. Uber will relocate its corporate headquarters to Oakland, while Tesla has brought thousands of high paying jobs to Fremont.

In addition to the region’s technology sector growth, San Leandro is home to three of the Bay Area’s largest craft breweries, a thriving downtown district with a host of retail and restaurant amenities, and the San Leandro Monarch Beach, a 40-acre mixed-use development anticipated to break ground this year.

“We are bullish on the East Bay and have a proven track record in this market,” continues Sharkansky, who notes that Trion recently acquired two value-add multifamily assets in Hayward and San Leandro last year.

“This property is located only a block away from our Metro348 property on the same street. Metro348 boasts a strong and diverse mix of tenants, many of whom work in the technology and healthcare industries, including employers such as Uber, Kaiser, and GE Health. Based on our enormous success in repositioning our existing Metro348 asset, the Bel Brook and Hideaway Apartments presents a unique opportunity for us to execute a similar value-add investment strategy and capitalize on the tremendous growth of this region, enabling us to generate strong cash flow and risk-adjusted returns to our investors.”

Sharkansky notes that it is rare to source a multifamily asset of this quality and vintage in a supply-constrained market such as the East Bay, where demand for quality housing continues to outpace supply. The property’s close proximity to Trion’s other East Bay assets will allow the firm to amass economies of scale and strengthen its operational efficiencies, according to Sharkansky.

Built in 1967 and 94 percent occupied at acquisition, this well-maintained community has strong in-place cash flow with tremendous upside potential, allowing Trion to strategically upgrade the property in order to bring rents up to market and increase net operating income.

The firm plans to modernize the property through strategic interior and exterior renovations to create a best-in-class San Leandro community. Interior renovations include the installation of new vinyl wood plank flooring, stainless steel kitchen appliances, modern cabinetry, high-end finishes, and bathroom upgrades.
In addition to these interior upgrades, Trion will completely rebrand the property through exterior improvements, including the installation of new signage, as well as significant upgrades to the leasing office, pool, fitness center, and recreational center.

“Our vertically integrated property management platform will enable us to reposition this community and provide competitive amenities that improve quality of life, allowing us to create a better end product for our residents,” confirms Sharkansky. “Ultimately, this acquisition is well aligned with our strategy of targeting well-located assets with strong value-add potential, then investing in strategic renovations to enhance asset quality and drive long-term value.”

The apartment community is located at 77-85 Estabrook Street in San Leandro, California. Trion Properties and joint-venture equity partner DVO Real Estate acquired this property from the John Sullivan family. Acquisition financing was arranged by Continental Partners through NXT Capital. John Leyvas Jr. and Brad Lehman of Newmark, Cornish and Carey represented both the buyer and the seller in this transaction.

Hunting The Wild Value-Add In Portland

Trion Properties managing principal Max Sharkansky tells us value-add multifamily deals still exist in greater Portland. Maybe not as low-hanging fruit, but they're still on the tree.

LA-based Trion recently acquired Hidden Villas, a 61-unit apartment property in Beaverton, for about $7M from a private owner. By repositioning and rebranding the property through various renovations, Trion plans to bring rents up to market rate.

"Hidden Villas presented a strong opportunity for us to acquire a value-add multifamily asset well below replacement cost, with strong upside potential," Max says. "Rents at this property are about 12% to 36% below market value, allowing us to capture rent growth upon lease turnover." Max, right, is snapped with his wife and managing partner Mitch Paskover and his wife.

Max says Beaverton has emerged and established itself as the sports apparel capital of the nation—Nike's world HQ isn't far away—and is a growing tech hub in the Pacific Northwest (the "Silicon Forest"). Those are two factors that make Hidden Villas a strong investment opportunity for Trion, he says.

The deal marks the firm’s fourth acquisition in the area and comes on the heels of another investment in the Portland metro, Tigardville Apartments, a distressed, 36-unit garden-style asset in Tigard.

Trion to Launch Fund With $100M in Buying Power

Trion Properties, the Los Angeles-based multi-family investment firm, is moving into the real estate fund business.

The company, headed by Max Sharkansky and Mitch Paskover, plans to raise a $30 million equity fund with $100 million in buying power to invest in multi-family assets in L.A., the Bay Area, San Diego and Portland, CoStar reported.

That means that, rather than raising money through syndication one deal at a time, the firm will be asking investors to trust that it will find them the right deals. It also gives Trion the ability to pull the trigger on a transaction at a moment’s notice.

“Our firm has a deep pipeline of opportunities that we’ve already identified, and the shift to a private equity fund will allow us to take full advantage of these opportunities as they arise, increasing activity in our target markets,” Sharkansky told CoStar.

Trion, whose current portfolio includes 720 units across those four aforementioned markets, says its edge is in its narrow focus on undermanaged multi-family properties.

“Because we’re so focused, we bring a deeper expertise in this product type and geography than our competitors,” Paskover said. “By targeting urban infill projects, we’re limiting the downside and ensuring that our assets can weather economic storms.”

The company recently nabbed the Avalon, a 47-unit building in the heart of Koreatown, for $7.54 million, or $329 per square foot. The seller was Vista Investment Group from Santa Monica.

Interview With Mitch Paskover

Did Trion Properties have a successful 2015?

Trion Properties had an extremely successful 2015—it was Trion’s highest volume acquisition year. Newly delivered renovated projects far exceeded our expectations, and we entered two new markets that we are very excited about—Portland and the East Bay (Bay Area). Additionally, we’ve spent the last couple of years solidifying our strategy.

There is a huge rental affordability crisis currently going on in the urban centers of the US. Not only has supply not been able to keep up with the demand from the millennial generation, but also with high levels of construction costs, the new supply is solely focused on catering to the top tier of renters.

Trion sees a huge opportunity here. Our strategy is to acquire underperforming boutique assets in gentrifying submarkets and renovate them to a high quality that is usually not exhibited in non-institutional assets. The effect is that residents at our properties typically pay a higher rent than other ‘mom and pop’ properties but at a huge discount to newer construction.

For example, The Eleanor, a 41-unit 1920’s building located in Westlake/Macarthur Park, a neighborhood that sits between Koreatown and Downtown Los Angeles, is getting the highest rents per square foot for an asset of its vintage in the submarket. However, even more importantly, the tenants who live in the community love their homes. The property has a five-star review rating on both Yelp and Apartments.com.

We look forward to delivering excellent communities to our residents and in turn, generating continued stellar returns to our investors in 2016.

What is Trion Properties target market when purchasing properties?

Our target markets for acquisitions are gentrifying neighbourhoods throughout the West Coast, primarily Los Angeles, San Diego, the Bay Area, and Portland.

We target assets that have potential immediately, but are located in areas that we believe will continue to grow into better neighborhoods. In 2015, most of what we acquired was located in neighbourhoods that historically have been lower income but have shown signs of rejuvenation. Whether it is the addition of public transportation or major employers, popular restaurants, nightlife, or coffee shops moving into the neighborhood, we are always looking for the next neighborhood to demonstrate signs of growth.

What markets have you already conquered? And what markets do you plan to enter in the future?

As previously mentioned, we own in West Coast markets, our home base of Los Angeles, San Diego, the Bay Area and Portland, Oregon. During the recession, we purchased assets in Sacramento that have done well for us, but we are exiting those assets this year.

We do not have plans to expand into other markets at this time. We have specifically chosen these markets that we believe are best prepared if there were another recession. Our current target markets are areas where job growth has far exceeded new supply, areas that have access to many high paying jobs and well-educated young renters.

What factors are driving tenants to the surrounding submarkets of the Bay Area?

The Bay Area has seen record job growth and an influx of renters—and not enough supply to keep up with unprecedented demand. However, the growth is not only in San Francisco or Silicon Valley anymore. Residents and companies alike have moved to the East Bay in search of affordability, access to public transportation and its central location. Companies such as Uber and Tesla are bringing high paying jobs to areas such as Oakland and Fremont, while the Apple and Googles of the world are snatching up the high-end office space of the Silicon Valley.

Why are the Hayward and San Leandro regions so popular or attractive for acquisitions?

Hayward is often referred to as the ‘Heart of the Bay’ because of the city’s central location in Alameda County—15 miles south of Oakland, 16 miles west of San Mateo, 25 miles southeast of San Francisco and 26 miles north of San Jose. The property’s central location makes it a short commute to many employment opportunities in the bustling Bay Area at a fraction of the rent of neighboring cities. Hayward has great access to the interstate 880, State Route 238, and State Route 92, which continues west as the San Mateo-Hayward Bridge. The city of Hayward just invested over $100 Million into the ‘Hayward Loop’ to cut down commute times and beautify Hayward’s Downtown.

San Leandro offers immediate access to BART stations, the Oakland International Airport, and the San Leandro Technology Campus, a 500,000 square-foot campus of connected office space adjacent to the BART station. The San Leandro Technology Campus, known as the ‘future of business and industry’, will bring an estimated 1,800 high quality jobs to San Leandro, thereby driving exponential economic growth in the next few years.

With strong competition in the US, what makes Trion Properties more attractive than its competitors?

Our vertically integrated property management/project management platform has allowed us to fine tune our repositioning skills, creating a better end product for our residents. We are always thoughtful on how to best cater to our residents, whether it be providing technological improvements such as smart locks, nest thermostats, or Uber concessions or arcade games in the common areas.

Additionally, we have good relationships with the brokerage community. Brokers that source us a deal will always get the deal back on the back end. We protect brokers on acquisition opportunities that they bring to us and will pay a fee when necessary. We understand the value that brokers bring to our business and we do everything to convey that, helping us to continue to build our pipeline.

Do you have any other acquisitions in the pipeline for 2016?

As of now, Trion Properties, along with an experienced development partner, has a ground up development deal under contract. The asset will be in the Culver City/Lower Westside location. This deal has an amazing location in close proximity to the growing ‘Silicon Beach’ startup culture, where hundreds of startups are beginning to headquarter their businesses. We are also continually looking to add to our portfolio.

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