Bridgeport-based developer Fairfield Ventures has acquired the Tower II Apartments, located at 1491 Central Ave. in Bridgeport, for $6.5 million.

As the state’s elderly population inevitably grows larger, elderly-specific housing complexes have become a viable option in the commercial market. That trend was evidenced by a national development firm’s recent sale of a block of elderly housing in Bridgeport, a move designed to benefit both the seller and the state of Connecticut.

Steve Witten of Marcus & Millichap Real Estate Investment Brokerage Co., a real estate investment brokerage firm based in New Haven, was among the brokers involved in the sale of the Tower II Apartments in Bridgeport. According to Witten, the asset commanded a sales price of $6.5 million with a 12 percent market capitalization rate. The building is a Housing and Urban Development/Housing Assistance Program project, and Witten said the transaction took place at a record speed, closing in under six months. Connecticut Housing Finance Authority financings with HUD rental contract transactions typically require one to two years before they finally close.

Marcus & Millichap agents Paul Davis, Andrew Daitch, Sean Hamilton, Victor Nolletti and Witten, who are based in the firm’s Detroit and New Haven offices, had the exclusive listing to market the property for the seller, Denver-based AIMCO Properties. The brokers are all members of Marcus & Millichap’s National Multi Housing Group, a division of the firm that focuses exclusively on the brokering of multifamily investment properties.

After generating a national marketing program in a competitive environment, Dennis Behunick, also of Marcus & Millichap, secured the ultimate buyer in the transaction. Fairfield Ventures, a Bridgeport-based developer, acquired the asset. The $6.5 million sales price represents $47,445 per unit and $81 per square foot.

The Tower II Apartments are located at 1491 Central Ave. in Bridgeport. The 137-unit property encompasses 79,902 rentable square feet on approximately one acre. The eight-story building was originally constructed in 1945 and is designated as “elderly.” Although the definition of elderly housing has changed slightly over the years, the designation remains intact.

‘Unique Animal’

According to Witten, AIMCO sold the asset to reduce the number of HUD properties in its portfolio. AIMCO currently owns and operates a geographically diversified portfolio of apartment communities through 19 regional operating centers.

“This facility is really a unique animal,” said Witten. “First of all, a handful of years ago elderly housing used to mean you had to be 62 or over. This property is what’s referred to as elderly restricted affordable housing, which is a very distinctive difference.”

“Elderly restrictive affordable” means the property is for residents aged 55 and over in need of financial assistance for housing.

“In Connecticut there is a very strong need for elderly restricted housing [units], which are typically for residents 55 and over. This is obviously a rapidly growing chunk of our population,” said Witten.

Often towns are wary of constructing apartment and multifamily complexes within their borders because of the strain such facilities will put on municipal services. Towns in Connecticut, however, more easily embrace elderly housing for several reasons.

One of the more significant reasons is the fact that elderly restrictive housing has a minimal impact on town services – specifically schools, police and parking lots.

“Multifamily units are a very viable option for seniors and they’re a viable option for towns as well,” said Witten. “These complexes have nominal impact on municipalities and don’t require a lot of attention from the town.”

In the case of Tower II Apartments, the units are considered affordable housing. That means that most of the tenants receive either Housing Assistance Program financing or aid through Section 8. The tenant’s contribution toward rent is based upon his income, making Tower II Apartments a subsidized project where most tenants are receiving federal or local government subsidies.

Financing for the project was provided by the Connecticut Housing Finance Authority, which Witten said is a good thing.

“This was a good Connecticut deal, so it’s only natural that the CHFA is involved,” he said.

AIMCO sold the property in an effort to streamline its management operations, according to Witten.

“AIMCO is one of the largest apartment owners in the country right now. They own both subsidized and more conventional market rate apartment buildings,” he said. “The purpose of selling Tower II Apartments was that they were basically looking for more management efficiency. In order to do that, they have been selling assets in markets where they don’t have a high concentration of properties.”

In Bridgeport, Tower II was the only property held by AIMCO.

“There is no management efficiency in running 137 units,” said Witten. Therefore, in order to create a more efficient management network, the decision was made to sell off the tower.

However, Witten was quick to point out that the apartments are in very stable condition and represent a healthy section of the rental market.

“This is a very viable project,” said Witten, who stressed that Tower II almost always operates at 100 percent occupancy. He also noted that in most cases, once tenants move in, they typically don’t move out unless they’re going to an assisted living facility.

“This is a very stable property with quality construction and a significant number of long-term tenants,” said Witten. “This is a great deal for Fairfield Ventures.”

With 34 offices and more than 700 investment professionals nationwide, Encino, Calif.-based Marcus & Millichap is one of the largest commercial real estate brokerages in the nation, focusing exclusively on real estate investments. Founded in 1971, the firm has created a system for marketing properties that combines product specialization, local market expertise, comprehensive research and analysis capabilities, state-of-the-art technology and established relationships with a large pool of qualified national investors.