Apartment Investment and Management Co. has picked up six apartment buildings in the Philadelphia market from Dranoff Properties Inc. for $445 million.
The properties include: Locust on the Park in the Fitler Square neighborhood; 777 South Broad St., Southstar Lofts on South Broad Street, the Left Bank in University City, the Victor in Camden, N.J., and One Ardmore Place, a 110-unit apartment complex under construction in Ardmore.
In all, the portfolio comprises 1,006 units, the 110 units under development in Ardmore and 185,000 square feet of office and retail space. The transaction is expected to close during the second quarter but for One Ardmore Place, which is expected to close during the first quarter of next year once completely constructed.
Denver-based Aimco (NYSE: AIV) has had a presence in Philadelphia for years. It owns six properties in the city including Park Towne Place and the Sterling. In all, it owns 2,863 apartments in Philadelphia and the Dranoff acquisition brings that number up to 4,005. Aimco has been looking for opportunities to expand its footprint in Philadelphia.
“We knew of Carl’s work and in the fall a mutual connection put us in touch,” said Wes Powell, executive vice president at AIMCO who led the acquisition team on this transaction. “The timing seemed right for them and the timing was right for us.”
Carl Dranoff started Dranoff Properties in 1997 and his first project was Locust on the Park, a $24 million conversion of the old National Book Publishing Co. building at 25th and Locust streets into 152 apartments. It opened in 1999 and was among the first projects to take advantage of the 10-year real estate tax abatement that initially focused on conversions but was later expanded to include new construction.
From that conversion, Dranoff moved onto University City, where few developers dared to venture, and spent $60 million converting the former 700,000-square-foot General Electric Building at 32nd and Walnut streets into the neighborhood’s first luxury apartment complex and called it the Left Bank. It has 282 apartments. Dranoff had entered into a long-term lease on the property with the University of Pennsylvania.
Dranoff was again pioneering when he turned to Camden’s Delaware River waterfront for a project called the Victor, which involved spending $60 million converting the old RCA Victor factory, a six-story, 550,000-square-foot building, into 340 apartments. He then turned his attention to South Broad Street, where he developed Symphony House, a condominium building, as well as 777 South Broad and Southstar Lofts. Most recently, Dranoff completed One Riverside, a high-end condominium building.
"My blood and brain is in all of these buildings," Dranoff told the Philadelphia Business Journal. "I think I’m one of the few developers who have maintained ownership with pride. I’m the builder, owner and manager. I’m probably a dinosaur."
Dranoff said he visited the properties today to inform his employees about the transaction. "I felt very personal about it," he said.
Dranoff said the properties weren’t up for sale though over the years he has had offers to sell part of the portfolio. He never wanted to break it up.
"This company came to me from left field and they made a compelling argument they would be good stewards for these properties," Dranoff said. "When Aimco came around they said they were seeking this portfolio out because of what it was, because of the high quality and high customer service. The company already has a portfolio in Philadelphia and wanted to have a larger market share for the long run."
That appealed to Dranoff. The transaction, however, doesn’t mean the developer is retiring, which he said is a word not in his vocabulary. He is full-speed ahead on two projects along South Broad Street, is completing the first residential high-rise in Newark, N.J., in 60 years and looking for other opportunities.
"I’ve never been more excited," he said. "I’m giddy with excitement."
Though Aimco has had a presence in Philadelphia for some time, it is encouraged by inroads made in job creation particularly with the city’s concentration of eds and meds, the improvement in the core of the city, its walkability and its general resurgence both in Center City and University City, Powell said. While Ardmore isn’t in Philadelphia, it fits into the company’s strategy of buying in markets that have high barriers to entry and located near transportation.
“We’re always on the look in all of our target markets and sometimes an opportunity arises that is a good fit,” he said.
The acquisition bring Aimco’s Philadelphia apartment holdings up to 4,005 units.