Article from: Commercial Mortgage Alert,  November 17, 2006

RBS to Back Rockpoint Purchases

RBS Greenwich Capital has agreed to provide $257 million of debt and preferred equity to help fund Rockpoint Group's purchase of majority stakes in two apartment portfolios in the Washington-Baltimore corridor.

RBS will write a $177 million floating-rate mortgage on four properties, with 2,729 units. It will also supply $80 million of preferred equity for nine other complexes encompassing 5,517 units. RBS wrote a $340 million fixed-rate mortgage on that portfolio last year. The loan, which matures in 2012, is ineligible for prepayment.

The properties have a combined value of about $700 million. Boston-based Rockpoint will buy 85% stakes in each portfolio from Lubert-Adler Real Estate funds, Lubert-Adler's partners — Sawyer Realty of College Park, Md,, and CMS Cos. of Philadelphia — will retain the remaining interests in each. Rockpoint plans to spend $23 million to upgrade the apartments.

The four-property portfolio contains complexes in Baltimore and Washington that are valued at just over $200 million. The average occupancy rate is 96%.

The other portfolio, valued at nearly $500 million, is made up of nine Maryland apartment properties with a 94% average occupancy rate. The largest complexes are the 1,212-unit Commons at White Marsh Apartments in Middle River and the 1,098-unit Highland Village Townhomes in Baltimore. Rents are about 5% below the market average of $791 for one-bedroom apartments and $950 for two-bedroom units.

RBS securitized the existing $340 million mortgage via two fusion deals that it conducted jointly with Goldman Sachs. The portfolio also has a $20 million mezzanine loan, held by Potomac Realty Capital of Boston.

The apartment market in the Baltimore area has remained tight because of job growth at a variety of employers, including defense contractors and bioscience and healthcare firms. The relatively low rents and scarcity of available land make construction difficult to justify. What's more, some owners have converted apartments to condominiums, reducing supply.

Potomac and Ackman-Ziff Realty of New York arranged the debt and equity, RBS will securitize the floating-rate loan and will likely sell the preferred equity, although a final decision has not been made.

Rockpoint will make the purchases via its Rockpoint Real Estate Fund 2, which closed last year with $1.7 billion of equity. The fund's investors include Calpers, Louisiana Teachers, New York State Teachers, North Carolina Public Employees, Oregon Public Employees, Pennsylvania State Employees and Wisconsin Investment.