Private equity firm Northland has entered the California market in a big way, buying THEA at Metropolis, a 59-story, 685-unit luxury tower in downtown Los Angeles, for a record $504 million from Greenland USA, the US subsidiary of China’s Greenland Holding Group.
It’s a record for the sale of a single rental property in Los Angeles and represents one of the largest single asset market-rate multifamily acquisitions in US history.
Despite the record-setting sale, the price paid was substantially less than Greenland was previously seeking. The asking price was $695 million 18 months ago for the rental property within the 6.3-acre, $1 billion Metropolis development completed in 2020, according to the The Wall Street Journal. It was the fourth and final luxury tower in the mixed-use Metropolis project and was originally designed and built as for-sale condominiums but converted to rentals after construction. Greenland, which sold two Brooklyn, NY, apartment buildings with 601 units to Avanath Capital Management in May for a total of $315 million, is among numerous Chinese investors who are selling US commercial real estate assets as they struggle to pay their debts.
Northland stated the purchase price values the multifamily units at $714,000 per unit and $688 per square foot, a 40 percent to 45 percent discount to today’s replacement costs. The firm acquired THEA without any partners, investing through its multi-decade-horizon discretionary funds and financing the purchase with 10-year fixed rate debt. Further details on the loan were not disclosed. The majority of the equity invested in THEA came from Northland’s disposition of Hilands, an 826-unit property in Tucson, Ariz. Northland acquired the property for $21 million in two purchases in 1992 and 1997 and sold it earlier this year for $178 million.
Matthew Gottesdiener, Northland CEO, said in a prepared statement that Northland saw an extraordinary opportunity to acquire what he termed the highest-quality luxury apartment tower in the United States at a steeply discounted price. He cited the building’s design, condo execution and luxury amenities as more reasons for the purchase. Gottesdiener said the firm believes in the Los Angeles and California markets as long-term investments.
JLL represented the seller in the transaction and secured the financing on behalf of the new owner. The JLL Capital Markets Investment Sales Advisory team was led by Senior Managing Director John Strauss, Managing Director Peter Yorck, Director Nick Lavin and Managing Director Bryan Ley. The JLL Capital Markets Debt Advisory team was led by Managing Directors Brandon Smith and Annie Rice.
Located on Eighth Street in the heart of DTLA, THEA has 30,000 square feet of ground-floor retail. Best-in-class construction and luxury finishes include full curtain wall floor-to-ceiling glass construction; units with an average of 1,038 square feet; real oak wood flooring; Gaggenau and Miele appliances including gas cooking ranges; European custom cabinetry and smart home features. The tower has eight penthouse units on the top two floors, all of which are corner units with an average size of 3,052 square feet, with 10 to 16 foot ceilings and unobstructed 360-degree views. Community amenities include a 1.5-acre podium amenity deck with a resort-style pool, cabanas, catering kitchen, rooftop dog park, garden and playground.
The property, which has 91 percent occupancy, has average monthly rents of about $4,500, according to the The Wall Street Journal.
Situated in the Los Angeles Central Business District, the area provides substantial employment opportunities through a wide range of industries including entertainment, professional services, technology, health care and fashion. The tower is adjacent to Interstate 110, which provides easy access to neighborhoods such as Hollywood, Beverly Hills, Venice and Santa Monica, Calif.
THEA is also two blocks from LA LIVE, a 5.6 million-square-foot sports and entertainment complex that encompasses Crypto.com Arena, Microsoft Theater and numerous restaurants and bars.
Northland’s growing portfolio
Gottesdiener said Northland has been growing over the past decade from a Class B suburban garden apartment investor with concentrated exposure in Florida, New England and Austin, Texas, to a national owner, operator and developer with portfolios across 16 states. The firm has $8 billion of assets under management, including more than 26,000 residential units and 2.1 million square feet of commercial space.
In late October, Northland expanded its national development platform by starting construction of a 194-unit expansion to SoRoc on Maine, a 186-unit, garden-style apartment community in Rochester, Minn., acquired in April. When completed in early 2024, the total 380 units will operate jointly across five buildings over 13 acres. It is the firm’s first Midwest project. The $3 billion development pipeline includes projects in Boston; Atlanta; Denver; Richmond, Va.; Connecticut; New Mexico and Arizona.
Northland has also been making other acquisitions across the US in recent months. In September, the company purchased 511 Meeting, a 221-unit luxury multifamily community in Charleston, SC In August, Northland acquired Emblem Alpharetta, a 210-unit senior housing community in Alpharetta, Ga. It was the company’s fourth Georgia purchase this year and second in the Atlanta area following its acquisition of The Maven, a five-building, 276-unit property in Suwanee, Ga. Also in August, Northland acquired Preserve West, a 318-unit garden-style community in Madison, Wisc.