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PhilMor REI Completes $47.6M Apartment Buy in Milford from Equity Via CBRE|NE

April 10, 2017 - By Joe Clements

MILFORD—PhilMor Real Estate Investments believes in this resilient central Massachusetts town, company co-founder Morgan Hanlon proclaims following his firm’s $47.6 million purchase from Equity Residential of 304 apartments in a community situated here along Interstate 495, the deal negotiated via CBRE/NE’s multifamily team and financed through its debt team pursued partly because of Milford’s diverse economic engine that employs thousands of people.

“We like the demographic of workforce housing there,” principal Morgan Hanlon tells therealreporter.com regarding the latest multifamily investment by an eponymic company he co-founded with industry veteran Phil Bakulchuk that has a couple of twists from previous apartment buys in Beverly, Chelmsford and Lowell. First, PhilMor REI is going alone on this endeavor, their inaugural solo approach in that CRE genre after partnering with Taurus Investments in prior value-add multifamily plays that aimed to accrete enhanced returns for backers through upgrading units to a new level and pushing market rents in improving communities.

In some respects a sleepy Worcester suburb whose greatest claim to fame is the Milford Pink Granite quarried there in its early years on a national scale, legions toil at such new-age hometown enterprises as Milford Regional Medical Center, TA Instruments and Waters Corp., each of those enterprises employing over 1,000 people including commuters hailing from as far a field as neighboring Connecticut and Rhode Island. Many of those, however, are among 27,000 Milford residents who would presumably include consumers of Rolling Green apartments, with other local firms featuring in excess of 500 workers being construction equipment concern Southworth-Milton Inc. and general contractor Consigli, the latter entity consistently cited as a best place to work in various sector surveys.

“We don’t think the demand is going anywhere,” Hanlon says regarding Rolling Green’s allure in reporting PhilMor is already pursuing a program to modernize mechanicals and make physical renovations enough to warrant higher rents, but does not require aggressively pushing the rate to strain what a given market will bear. “The value of the investment to us is in the cash flow,” explains Hanlon. “It is not so much about appreciation or upside; this is a project we like because it has good scale, and it is one we think can benefit from a refresh and hands-on ownership.” The acquisition and improvements are being fueled by Fannie Mae funding of $38.7 million originated by CBRE Multifamily Capital Inc. and arranged by John C. Kelly of CBRE/NE’s debt and structured finance group that operates as part of the firm’s Capital Markets group, the same unit as its multifamily brokerage.

Hanlon says having industry giant Equity as Rolling Green’s lengthy sponsor prior to the sale should assist in keeping repairs limited enough to leave rents in acceptable range pricewise for a constituency which has kept occupancy consistently solid at Rolling Green during Equity’s tenure, a track record CBRE/NE broker Simon Butler says was useful in luring a number of suitors from both near and far before PhilMor was able to pull ahead of the pack by agreeing to pay over $156,500 per unit.

“It was a good process for our client, who we were very happy to assist,” Butler says in declining furhter comment regarding Equity, a REIT which has been reformulating its regional holdings over the past several years, engaging the market-leading duo of Butler and principal Biria St. John on a number of trades similar to the just-completed exchange. A recent Equity Residential suburban sale orchestrated by them include 404 Fall River apartments that sold in late 2016 to the aforementioned Taurus at a consideration of $39.3 million, or $97,000 per unit for South Winds, the 28-building complex which opened in 1971. It was part of CBRE/NE’s banner season where $2.4 billion in multifamily volume was produced for the firm’s clients.

Located at 1 Rolling Green Dr., the Milford apartments were acquired by PhilMor REI Milford LLC. Equity Residential secured the project in autumn 2000 as part of a $460 million buyout of Grove Property Trust, with the Milford piece valued then at $12.7 million, according to Registry of Deeds records.

Besides the Taurus partnerships, PhilMor REI made news this past year selling 13 self storage properties to CubeSmart, that $88 million deal brokered by Newmark involving assets in New Hampshire and Massachusetts which Hanlon’s family owned firm, Casey Storage, had assembled or developed over several decades. The company will continue to eye opportunities, Hanlon says, including potential partnerships and further ventures for its own accord.

“As long as we feel we are not compromising our existing holdings, we will continue to pursue opportunities in both self-storage and multifamily,” he says. “We might not be doing 10 deals a year, but if it is something we can handle (capacity-wise) and if we think we can create value, we would want to take a closer look.”

JOHN C. KELLY Biria St. John Simon Butler