Acquisitions, General, Industry

Seattle Firm Closes First Acquisition Fund To Buy Apartments at Discount Prices

Originally Published: costar.com

Seattle-based Timberlane Partners closed its first multifamily investment fund with more than $100 million intended to buy discounted apartments as investors capitalize on a sales slowdown that has shaken up property values.

The company said it closed its Timberlane Acquisition Fund backed by ultra-high-net-worth investors, family offices and registered investment adviser fi rms, and has used the fund to buy The Wilcox and Koi apartment properties in Seattle’s Ballard district and the Little Tuscany apartment complex in Olympia, Washington.

Timberlane is using the closed-end private fund to acquire multifamily properties across the West Coast and Mountain West regions. It expects to purchase a fourth property next month as the company takes advantage of a 20% decline in multifamily property values across the region from their peak in July 2022, the company said in a statement.

Multifamily sales have slowed in greater Seattle, with about $2.2 billion in transaction volume over the past 12 months, well below the average annual sales volume of $5.3billion over the past five years, CoStar data shows.

Timberlane said it has a record of providing investors with a more than 25% net-internal rate of return across properties sold since it was founded in 2011 by Dave Enslow and John Chaffetz, according to the statement.

Timberlane last June hired a top producer from CBRE and two other real estate executives to help with its West Coast expansion. The same month, the company bought its first property through the fund, the 142-unit Little Tuscany Apartments at 1000 FernSt. SW in Olympia, for $37 million from Calabasas, California-based Forbix Financial.

In late December, Timberlane and joint-venture partner Stars REI, based in Chile, acquired The Wilcox apartments at 2003 NW 57th St. in Ballard for just over $45 million from an affiliate of J.P. Morgan Global Alternatives. The purchase price was well below the $60.3 million that the J.P. Morgan affiliate spent on the for the 132-unit property in June 2018.

Timberlane and Stars in February paid $55 million for the 166-unit Koi Apartments at 1139 NW Market St. in the Ballard neighborhood from CBRE Investment Management.

That’s about $2 million less than the $57 million, or about $343,373 per apartment, than the seller paid to acquire the six-story property in June 2014, CoStar data shows.

“Our fund strategy is straightforward: acquire high-quality multifamily assets in fundamentally attractive markets at substantial discounts, optimize their operational performance, and divest to institutional buyers when liquidity reenters the market,” Timberlane partner Jake Leibsohn said in the statement.