Gaia Real Estate Holdings LLC and its US partner Starwood Capital Group have bought 9,500 rental apartments across the US for $446 million. They will invest $22.5 million of new equity to acquire and recapitalize the properties' owner, PJ Finance Company, and take a $423 million bank loan, which will be repaid over eight years, Gaia owner Danny Fishman told "Globes".
PJ Finance filed for Chapter 11 bankruptcy protection in March 2011, and reemerged as a going concern earlier this week. The properties were bought at auction and the sale was approved by the US Bankruptcy Court.
The apartments are located across the US sunbelt: 4,275 apartments in Dallas, 1,805 in Phoenix, and the rest in Houston, Corpus Christi, Atlanta, Nashville, Fort Lauderdale, and Orlando.
Fishman said that the properties' minimum return on investment is 16% a year. Most of the apartments are two bedroom apartments which are leased for $700-900 a month, depending on their location. The properties' current occupancy rate is 90%, and they house more than 30,000 people.
PJ Finance bought the properties in 2001, and recapitalized them in 2006 with more than $540 million of securitized debt financing, at a valuation of $580 million. Fishman said that investors included Lehman Brothers, which provided a mezzanine loan that was written off in full.
Over the next eight years, Starwood and Gaia plan to implement a $45 million capital improvement plan. They have hired property management firm Pinnacle Company to manage the portfolio and assist in executing the improvement plan.