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Kline Sells 1,009-Unit Northern NJ Affordable Housing Portfolio to Joint Venture for $180M

25 S. Grove Street, East Orange NJ, one of the properties in the Kline affordable housing portfolio in Central NJ 25 S. Grove Street, East Orange NJ, one of the properties in the Kline affordable housing portfolio in Central NJ

PATERSON, EAST ORANGE, METUCHEN, OLD BRIDGE, HAZLET, and EAST WINDSOR—Kline Enterprises has sold a 1,009-unit affordable housing portfolio, managed by First National Properties, to a joint venture between Hudson Valley Property Group, Red Stone Companies and Wheelock Street Capital for $180 million.

The transaction was brokered by SVN Affordable/Levental Realty, which focuses on project-based Section 8 and Section 42 housing. Kline is a second-generation, family-owned organization that assembled the portfolio of senior and family affordable assets located in Paterson, Orange, East Orange, Metuchen, Old Bridge, Hazlet and East Windsor.

“SVN Affordable was selected as the exclusive listing broker for the seller given our national platform and understanding of the regulatory and complex financial environment surrounding this asset class,” says Gene Levental, managing director, SVN Affordable.  “Senior advisor Jamie Renzenbrink led the transaction on behalf of the firm.  After creating a competitive pool of 168 qualified affordable developers, we vetted out buyers’ underwriting assumptions and debt/equity models to assure we had a clear and closable path to closing.”

Pryor Cashman’s Ronald B. Kremnitzer, co-chair of the Real Estate practice, and partner Perry Amsellem and associate Ari Tran acted as seller’s counsel for Kline and FNP.

“This was a complex transaction that required the finesse of an experienced legal team,” says Kremnitzer, lead counsel on the transaction. “We are thrilled to help this sophisticated deal, which included multiple contracts and an in depth understanding of regulatory hurdles, across the finish line after a diligent, yearlong effort.”

The seven properties are subsidized by long-term project based section 8 contracts and encumbered by various regulatory restrictions.  Some of the characteristics of the individual assets made the portfolio uniquely challenging to value and finance.  The $180M value is the result of a sophisticated financing structure specific to portfolio transactions, SVN Affordable says.  The sale of the portfolio will ensure long-term affordability for over 2,500 residents and preservation of the assets through sustainable upgrades and planned renovation over the next several years.

The properties are:

  • 25 S. Grove Street, East Orange NJ – 128 units
  • 300 Oakwood Avenue, Orange NJ -144 units
  • 85 Paterson Street, Paterson NJ – 159 units
  • 1 Clark St. Hazlet, NJ – 141 units
  • 35 Lincoln Ave., Metuchen, NJ – 122 units
  • 100 Ticetown Rd, Old Bridge, NJ – 204 units
  • 719 St. James Place, East Windsor, NJ – 110

Community Realty Management will act as third-party property manager, while retaining most existing staff members at each of the properties.  Financing was provided by Walker and Dunlop and Fannie Mae. Goodwin Procter, Nixon Peabody and Berman Indictor served as purchaser’s legal counsel for the transaction.

Editor’s Note, 2/23/2017, 7:31 a.m.: This article has been updated to include a list of the individual properties included in the portfolio.

 

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