IN-DEPTH: J.P. Morgan buys Philadelphia apartment complex

J.P. Morgan Asset Management has purchased Edgewater Apartments in downtown Philadelphia. Here’s an in-depth look at the deal.

THE DEAL

The New York City–based asset manager acquired the 290-unit apartment complex at 2323 Race St. for $113.5 million. The sellers were joint venture partners Northwestern Mutual Life Insurance and Realen Properties. HFF represented the seller.

The price paid for the Edgewater is the highest for a Philadelphia apartment property in more than 10 years.

THE ASSET

Edgewater is a development that includes 270 apartments in a 13-story building and 20 townhouses at 23rd and Race streets. It was placed on the market in November 2013 by the owners.

Realen Properties constructed Edgewater with its finance partner Northwestern Mutual Life Insurance Co. Edgewater was the first phase of the apartment complex. It was completed in 2006.

The property is being sold with an adjacent site that has been approved for the second phase of Edgewater in May 2013, which is the construction of a 22-story, 240-unit building on an existing surface parking lot. The first phase of Edgewater totaled $70 million.

The existing Edgewater complex is fully occupied. The property has a 1-acre waterfront garden that has Wi-Fi, a dog park and direct access to river trail. The second phase will have more amenities, including a rooftop pool.

THE MARKET

The Philadelphia apartment sector has seen relatively active since the first quarter 2011, according to data by Real Capital Analytics. Since 2011 Philadelphia’s apartment sector has had up-and-down investor activity but consistent positive growth since the first quarter 2011 levels. The fourth quarters of both 2012 and 2013 showed the same amount of sales activity. 

During fourth quarter 2013, approximately 23 transactions were completed for a total investment volume of $373.5 million. Thus far during first quarter 2014, approximately nine transactions have been completed totaling $475.4 million. During full-year 2013, approximately 70 transactions were completed for a total sales volume of $839.3 million.

The top buyers in Philadelphia’s apartment sector during the past two years are Lindy Property Management and Lowe Enterprises.

Lindy bought three properties totaling $179.2 million. A recent acquisition was the firm’s purchase of Towers at Wyncote, a 1,095-unit apartment complex, for $111 million.

And Lowe purchased two properties for $152.5 million in February 2014. The firm bought 1501 Locust St. and The Granary. The seller for both properties was Pearl Properties.

THE PLAYERS

J.P. Morgan Asset Management is an asset manager with assets under management of $1.5 trillion as of Sept. 30, 2013.

Northwestern Mutual is a financial services company that offers a variety of insurance and investment solutions.

Realen Properties, based in Berwyn, Pa., is a developer of multifamily residential apartments.