KMS Management Inc. is in the process of selling its Minnesota rental portfolio, allowing its founder to transition to retirement.
North Dakota’s Centerspace is acquiring $323.8 million of the portfolio, doubling its presence in Minneapolis. In a separate, private transaction, Chicago real estate firm North Park Ventures acquired the other portion of KMS’ portfolio, which is primarily made up of Minneapolis brownstones.
Robert Levine founded KMS in 1985. Levine sold the portfolio because he, along with some of his partners, recently entered their retirement years. Levin is also looking to spend more time in Arizona, said Greg McDonald, president of Edina-based Magnum Capital and Real Estate Services. He was the seller’s broker and is licensed in six states and soon to be in a dozen states.
Centerspace, formerly known as IRET, acquired 19 properties, (home to 17 communities), for a combined total of 2,696 units in the Twin Cities and St. Cloud areas. The average price per unit works out to approximately $120,104, according to a news release from Centerspace.
The acquisition increases Centerspace’s footprint in Minneapolis, where it now owns 4,901 units, and in St. Cloud, where it owns 1,524 units, the release said.
“This fully funded acquisition fits seamlessly into our investment thesis,” Mark O. Decker Jr., Centerspace’s president and CEO said in a news release. “Adding KMS’ communities, team and investors to our Company will double our presence in our core market of Minneapolis, increase the scale of our operations and provide numerous opportunities to improve our business.”
Centerspace’s portfolio includes:
- Palisades Apartments at 560 Sandhurst Drive W., Roseville; 330 units
- River Pointe Apartments at 7855 E. River Road, Fridley; 301 units
- Woodland Pointe Apartment Homes at 6850 Ashwood Road, Woodbury; 288 units
- Burgundy Apartments/Hillsboro Court Apartments at 2701 and 2911 Hillsboro Ave. N., New Hope; 251 units
- Windsor Gates Apartments at 6200 78th Ave. N., Brooklyn Park; 200 units
- Woodhaven Apartments at 6045 Lyndale Ave., Minneapolis; 178 units
- New Hope Garden Apartments/New Hope Village Apartments at 5600-5650 Zealand Ave. N. and 5615 Xylon Ave. N., New Hope; 151 units
- Wingate Apartments at 7700 Fourth St. N., New Hope; 136 units
- Bayberry Place at 3395 Yankee Doodle Lane, Eagan; 120 units
- Gatewood Apartments at 813 Seventh St. S., Waite Park; 120 units
- Legacy Apartments at 248 Third St. S., Waite Park; 119 units
- Calhoun Apartments at 2893 Knox Ave. S., Minneapolis; 97 units
- Plymouth Pointe Apartments at 9630 37th Place N., Plymouth; 96 units
- Pointe West Apartments at 3225 Maine Prairie Road, St. Cloud; 93 units
- Grove Ridge Apartments at 8120 E. Pointe Douglas Road, Cottage Grove; 84 units
- Southdale Parc Apartments at 2720 66th St., Richfield; 70 units
- West Calhoun Apartments at 3146 Bde Maka Ska, Minneapolis; 62 units
North Park Ventures acquired eight properties, seven of which are brownstones, for a “handsome amount.” The 332-unit portfolio includes properties in Minneapolis’ Loring Park and Whittier neighborhoods, McDonald said.
North Park’s portfolio includes:
- 214 Oak Grove Apartments at 214 Oak Grove St., Minneapolis
- Haverhill Apartments at 32 Spruce Place, Minneapolis
- Brentwood Apartments at 127 W. Grant St., Minneapolis
- 2012 Garfield Apartments at 2012 Garfield Ave. S., Minneapolis
- 2219 Garfield Apartments at 2219 Garfield Ave. S., Minneapolis
- 2417 Garfield Apartments at 2417 Garfield Ave., Minneapolis
- 2400 Harriet Apartments at 2400 Harriet Ave. S., Minneapolis
- 2216 Harriet Apartments at 2216 Harriet Ave. S., Minneapolis
The Chicago firm is “beholden to brownstones. They like them. They’ve done them in other markets,” he said.
This transaction is expected to close at the end of July, and the Centerspace transaction is likely to close in mid-August, he said.
The Centerspace portfolio transaction was done through a 721Transaction, also known as an umbrella partnership real estate investment trust (UPREIT), process. Through this, the seller transacts with a public or private REIT who exchanges interest in the partnership through partnership units, which pay a dividend. The REIT doesn’t use cash in the transaction. This means tax on the seller’s gains are deferred, according to McDonald.
McDonald approached KMS with the idea of an UPREIT transaction, he said.
“I studied the portfolio and I saw that they had owned these properties for a long time,” he said. “I just thought the 721 would be wise. … And then we got together and we identified several parties that could be players.”
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