With the acquisition of the Mark Center portfolio in Alexandria, Va., for $509 million, Morgan Properties has completed the second-largest multifamily transaction in its history and the largest transaction across all of Virginia in 2017.
The Mark Center is one of the largest institutionally maintained contiguous portfolios in the country. According to Jonathan Morgan, president of Morgan Properties JV Management, the company was drawn to this portfolio for its location, size, and value-add potential, given that over 97% of the portfolio’s units have never been renovated.
“If we’re going to enter a new market, such as Northern Virginia, we need to have size and scale,” Morgan says. “So we needed at least 2,000 units for us to generate operational efficiencies and add value. In this case, 2,600 units and 150 acres was a big draw.”
The property contains 2,664 apartment units and 63,320 square feet of retail space on over 150 acres of space, all located in the Seminary Road submarket near Washington, D.C. Many federal defense contractors, government agencies, and the Inova Alexandria Hospital are located nearby.
The apartment units are distributed across six garden-style communities: Hillwood, Stroneridge, Meadow Creek, Lynbrook, Brookdale, and Willow Run. Morgan Properties intends to execute a $35 million value-add plan on these assets and consolidate them into four large apartment communities in order to maximize their operational efficiency.
Morgan plans to install over 2,200 in-unit washers and dryers, as well as upgraded kitchens and exterior enhancements. Incoming amenities will include a newly renovated clubhouse, a fitness center, business center, movie theater, clubroom, putting green, and dog park.
The transaction includes the Mark Center’s redevelopment right, which the previous owner had received from the city of Alexandria in 2012. “JB [the seller] had the right to increase the density almost threefold, so it could triple this density from 2.5 million square feet to 6.4 million square feet, and it could increase the number of units from 2,500 to 6,000 units as a right for 30+ years. While we typically own and operate existing assets, it gives us total optionality for us to explore this redevelopment right,” Morgan says.
Overall, Morgan Properties has expanded its D.C. metro area portfolio holdings from 4,300 to 21,500 units over the past five years. The Class B multifamily owner–operator has acquired $800 million in new acquisitions across all of its markets so far this year and is on track to expand its holdings by over $1 billion.
“I see our growth continuing, but it’s very strategic,” Morgan says. “It’s going to be more opportunity driven based on where we are in the cycle. We feel that fundamentals are still very strong in our business; we have a captive audience in Class B, but we also want to be mindful of where we are.”