NEW YORK, NY - Tarragon Corporation, a leading mixed-use developer with a focus on for rent and for sale multifamily housing, today announced that it has formed two joint ventures with Northland Investment Corporation, a privately held real estate investment company headquartered in Newton, Massachusetts. The joint ventures with Northland will own substantially all of the 21,000 rental apartment homes controlled by the two firms.
The 83 properties are located nationwide, with concentrations in Florida, Connecticut, Massachusetts, North Carolina, Texas, Tennessee and Arizona. Based on the parties' joint assessment of their equity in the properties contributed, Tarragon and its affiliate, Ansonia, will initially own 22.4 percent of each joint venture and Northland 77.6 percent. The joint ventures will also purchase Bermuda Island in Naples, Florida, and Northgate in Waverly, Rhode Island, and, when completed later this year, The Vintage at the Grove in Manchester, Connecticut and Aldridge at Gateway in Murfreesboro, Tennessee from Tarragon for a total of $166 million.
Tarragon and Northland will also form a joint venture to provide property, asset and construction management services to their properties and to third parties. This entity will employ about 600 people, with headquarters in Massachusetts and satellite offices in Connecticut, Texas and Florida. The management services company will be owned in the same proportions as the real estate joint ventures.
Northland has also agreed to provide Tarragon with a commitment for a $50 million, two-year secured loan, which Tarragon may use to purchase Tarragon debt at a discount. Tarragon's interest in the real estate joint ventures would secure the loan. The closing of this loan is subject to final documentation and customary loan closing conditions. Tarragon announced on March 27 that it had obtained a standstill agreement effective through September 20, 2009 from the holders of its $125 million of corporate-level, unsecured, subordinated notes, and that the Company had been granted an option to purchase the subordinated notes at a discount. The formation of the joint ventures is subject to receipt of lender consents and satisfaction of other customary closing conditions.
Tarragon Chairman and CEO William S. Friedman commented: "The four property sales will generate $16 million in cash and increase our equity in the joint venture by $4.4 million. The Vintage at the Grove and Aldridge at Gateway will be the second and third newly built rental properties sold by Tarragon this year as part of its merchant building initiative. Total merchant building sales are expected to reach $220 million in 2008. The formation of the residential joint ventures and property sales, together, are expected to reduce Tarragon's consolidated debt by about $600 million. Additionally, the real estate joint ventures are expected to have better access to capital and will be better able to take advantage of opportunities arising out of the current real estate market dislocation. Tarragon Corporation, in addition to its investment in the joint ventures, expects to continue to develop new mixed-use or rental properties for sale or for contribution to the real estate joint venture. We also anticipate continuing to liquidate our condominium inventory and, as we free up capital, investing in other opportunistic real estate ventures."
Source: Market Wire