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Inland Residential Properties to Buy Luxury Frederick Apartment for $46M

September 1, 2015
By Erika Morphy | Washington, DC

The Haven at Market Square

FREDERICK, MD—Inland Residential Properties Trusthas entered into an agreement to acquire the fee simple interest in The Haven at Market Square for $45.8 million in cash, according to a Securities and Exchange Commission filing.

The seller is an LLC that is an unaffiliated third party. The apartment community’s website indicates that the property belongs to Haven Apartment Communities, which is part of the multi-family division of Johnson Development Assoc., a real estate developer in Spartanburg, SC.

If the deal goes through, Inland Real Estate Acquisitions will assign the contract rights to acquire the property to Inland Residential Properties Trusts or one of its subsidiaries.

The REIT has some very specific pro forma expectations about the loans it plans to secure for the property.

It will first be funded with a secured mortgage loan for the purchase price, with $9 million unconditionally guaranteed by Inland Real Estate Investment Corp.

This interest-only mortgage loan will be secured at a fixed rate of 3.95% for one year, the filing said.

When it matures the lender will provide a new seven-year non-recourse mortgage loan, provided the loan to value does not exceed 60%. The new mortgage loan would also be interest only for five years and then convert to a 30-year amortization schedule at a fixed interest rate of 3.79%.

Or rather, that is the plan. As the filing states, “there can be no assurance we will obtain a loan on these specific terms.”

According to the seller, the property was 92.5% occupied as of mid-August, with approximately 190 residential units leased. Some 64 leases expire during 2015 and 126 leases expire during 2016.

Inland does not intend to make significant renovations or improvements in the foreseeable future. It notes that there are five and three “competitive apartment complexes” located within approximately three and five miles of the property, respectively.

Its reasons for acquiring the property include the fact that The Haven at Market Square is part of Market Square at Frederick, a 179,350-square foot retail center anchored by Home Goods, Pier 1 Imports and PetSmart. Also, Clemson Corner, a 400,000 square foot retail center is nearby, “making the property the only apartment community within walking distance to Wegmans.”

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John E. Moriarty, ChFC
December 2015
February 3, 2016

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