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Thursday, May 31, 2007

North Pointe apartment towers change hands

By STAN BULLARD11:50 am, May 31, 2007

Associated Estates Realty Corp. (NYSE: AEC) in Richmond Heights has sold North Pointe, a massive apartment complex in two, 22-story towers in Euclid, to K&D Group of Willoughby.

The 949-unit North Pointe is best known by its former name, the Watergate Apartments. Neither party disclosed terms of the transaction, although Associated Estates said it sold the property for a cap rate of 4.5%, an industry measure that compares a property’s income-producing revenue and cost.

Doug Price, a partner in K&D with Karen Harrison, said K&D bought North Pointe because it owns adjoining high-rise properties, such as the 1,100-unit Harbor Town apartment complex.
“To me, it’s the premiere building on Lake Shore (Boulevard),” Mr. Price said in an interview this morning. He noted he had looked at the building when Associated Estates previously offered it for sale but passed because it needed so many physical improvements.

Associated Estates since has spent heavily to upgrade heating and cooling systems and put $12 million into repairing the parking garage serving the 1971-vintage complex, Mr. Price said. So, he noted, “We have the fun cosmetic stuff to do.” He said K&D plans to spend at least $3 million on redoing hallways and even painting the exterior of the buildings.

The complex has an 11% vacancy rate, which Mr. Price expects K&D to reduce.John Shannon, Associated Estates senior vice president of operations, said the sale is part of the real estate investment trust’s plan to reduce its Midwest exposure.Associated Estates is an owner or partner in 98 properties in nine states, comprising 19,701 units.


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