Northern Virginia Apartments Command $80.5M in Value-Add Play


Capital Square 1031 has acquired Misty Ridge, a 409-unit multifamily community in Woodbridge, Va., from Castle Lanterra for $80.5 million, according to Transwestern Commercial Services, who represented the seller in the deal.

Castle Lanterra originally acquired the property, located at 1989 Delaware Drive, in 2013 and went to work on implementing a value-add strategy. The 328,066-square-foot garden-style community was built in 1989 and has seen approximately $5 million invested in renovations over the past six years, with 65 percent of the units being upgraded.

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“The property is a Class B community with a clear path to improve to a solid Class B-plus through interior renovation to the remaining 144-units,” Transwestern Mid-Atlantic Multifamily Group’s Executive Vice President Dean Sigmon, told Commercial Observer. “Prior ownership had completed significant previous capital improvements which will allow the new ownership to focus on revenue-generating interior improvements.” 

According to Transwestern’s recent market evaluation, Northern Virginia value-add properties are in high demand, especially vintage communities from the 1980s and early ’90s, where there’s an obvious gap in pricing in rental rates of $400 to $600 when compared to newer Class A communities.  

“This is what we saw in the Woodbridge area which drove strong investor interest in Misty Ridge,” Sigmon said. “As a result of our marketing process, we were able to garner multiple offers above our initial valuation from not just local investors, but national and foreign equity investors as well.”

It’s believed that finishing the upgrades will provide income growth with premiums ranging from $150 to $200 per month per unit, according to Sigmon.

The property faced an upcoming debt maturity in May of next year, which was a catalyst in bringing the property to market, he said. “With a 2020 maturity date approaching, the timing seemed right for selling, given the low interest rate environment and strong investor interest we are currently experiencing for value-add product.”

The buyer, Capital Square 1031, is “a leading sponsor of Delaware statutory trust offerings for investors seeking replacement property as part of a Section 1031 exchange and cash investors,” according to its website. A 1031 exchange allows an investor to swap one investment property for another while deferring any capital gains tax. 

The property’s location just off US Route-1 offers convenient access to I-95 HOT Lanes, access to the Franconia-Springfield Metro Station and AMTRAK’s Northeast Regional line at Woodbridge Station, providing ideal commuter access for residents in Prince William County and throughout Northern Virginia and Downtown D.C.  

Joining Sigmon on the deal were TCS’s Robin Williams, executive vice president and co-director, and Justin Shay, vice president.