Terri Harris

Connect Money
By: Joe Palmisano

May 23, 2024

Bonaventure, an alternative asset manager based in Alexandria, VA, has announced the sale of an approximately $18 million investment in Attain Downtown, a 156-unit Class-A multifamily community in downtown Norfolk, as well as the acquisition of Cavalier Crossing, a 144-unit apartment community in Charlottesville.

The transactions were carried out on behalf of Bonaventure Multifamily Income Trust, Inc., a perpetual life multifamily investment fund.

BMIT will retain controlling ownership in Attain Downtown and continue to manage its operations. The company used the proceeds from the sale to acquire Cavalier Crossing through a tax-efficient 1031 exchange.

The combined transaction represents one of Bonaventure’s current investing strategies, which is to extract capital from stable core assets and reinvest it in undervalued or mismanaged value-add opportunities with the potential for higher risk-adjusted returns.

Bonaventure sold fractional ownership of Attain Downtown as a customized solution for an investor looking to use the 1031 exchange. The sale was structured as a tenancy-in-common deal, which permits numerous investors to own undivided interests in a single property while deferring capital gains taxes using a 1031 exchange.

“The 1031 transaction type allows for all involved parties to benefit. BMIT retained an ownership stake in Attain Downtown and continues to manage the property, and the new co-owner enjoys the potential for risk-adjusted returns without having to actively manage the property,” Bonaventure CEO and founder Dwight Dunton said.

Cavalier Crossing is part of BMIT’s 20-property portfolio, which includes high-quality multifamily properties throughout the Mid-Atlantic and Southeast.

Since its founding in 2021, BMIT has acquired properties, many of which have utilized custom-built 1031 or 721 exchange programs under the Internal Revenue Code.

BMIT enables high-net-worth investors to invest in institutional-grade real estate by providing access to a diverse pool of assets with attractive risk-adjusted returns, consistent cash flow, and tax benefits. To date, the fund has 3,790 units and over $1 billion in total assets under management.

Pictured: Attain Downtown

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Firm Unlocks Investable Capital, Expands Portfolio Through 1031 Exchange

By Jon Leckie
CoStar News

May 23, 2024 | 3:00 P.M.

Multifamily investment and management firm Bonaventure has sold a partial ownership stake in a luxury multifamily property to fund the purchase of a project in need of upgrades through a tax-advantaged transaction as disruptions in traditional financing have dragged down sales volume across the sector.

The dual deal centers on Bonaventure’s sale of a roughly $18 million equity position in Attain Downtown, a 156-unit Class A multifamily property in Norfolk, Virginia. Proceeds from the sale were then used to purchase Cavalier Crossing, a 144-unit garden-style apartment complex in Charlottesville, Virginia, that will also undergo a comprehensive renovation to update unit interiors and amenities at the property that debuted in 2003.

“The acquisition of Cavalier Crossing aligns perfectly with our current acquisition strategy of identifying undervalued assets in growth markets that offer significant potential for value creation,” Dwight Dunton, Bonaventure’s founder and chief executive, said in a statement.

The transactions were completed on behalf of the Bonaventure Multifamily Income Trust, the company’s perpetual life multifamily investment fund, and utilized the tax advantages available through a so-called 1031 exchange. Named for a section of the U.S. tax code, a 1031 exchange allows the property’s seller to defer capital gains taxes by quickly reinvesting those funds in other real estate assets.

Under the terms of the partial sale of Attain Downtown, Bonaventure will maintain a majority stake in the property and continue to oversee its operations. The deal was structured as a tenancy-in-common transaction, allowing multiple investors to own undivided interest in a single property while deferring capital gains taxes through a 1031 exchange, according to the company.

The purchase of Cavalier Crossing was also completed through a 1031 exchange, deferring capital gains taxes on the proceeds from the partial sale of Attain Downtown.

“This transaction represents one of the many customized solutions we can offer our clients to solve their 1031 exchange needs, while also helping us grow strategic new partnerships,” Dunton said.

Bonaventure originally purchased Attain Downtown for $29.3 million in January 2019 from Marathon Development Group, according to CoStar data. Cavalier Crossing was last purchased by apartment giant Greystar in a six-property portfolio deal completed in August 2021.

Low Investment Activity

The current combined transaction is part of a tactic being employed by Bonaventure to extract capital from stable assets and redeploying those funds into value-add opportunities that offer the potential for greater risk-adjusted returns, the company said, and comes at a time when multifamily investment volume has been depressed.

According to the brokerage CBRE, just $19.8 billion in transaction activity occurred in the first quarter, down 28% from the final quarter of 2023 and the lowest level since the second quarter of 2020.

Reasons for the limited activity range from the increased cost of capital due to stubbornly high interest rates that have been a primary factor in maintaining distance between what pricing terms sellers and buyers expect. This has left many of the largest publicly traded apartment owners on the sidelines, including Mid-Atlantic Apartment Communities, AvalonBay and Equity Residential, which registered zero acquisition activity in the first quarter, even as the industry sits on what Mark Parrell, Equity’s CEO, said was more than $200 billion ready to invest in apartments.

“There’s a gap between both bid and ask, as well as a shortage of capital in this part of the cycle,” Dunton told CoStar News about the reasons for the slowdown in transactions. “What we were able to accomplish was unlocking some capital by solving with someone who was a tax-motivated investor. We then were able to redeploy that capital in a somewhat distressed situation where we were able to meet the current owner’s sales expectation.”

The Bonaventure Multifamily Income Trust currently has 3,790 units across its 20-property portfolio and over $1 billion in assets under management. The fund is focused on opportunities generated by a systemic housing shortage and positive migration trends in the Southeast.

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Alternative asset manager Bonaventure announced the sale of a roughly $18 million interest in Attain Downtown, a 156-unit Class-A multifamily community in downtown Norfolk, Va., and the acquisition of Cavalier Crossing, a 144-unit apartment community in Charlottesville, Va. The transactions were completed on behalf of Bonaventure Multifamily Income Trust Inc., a perpetual life multifamily investment fund designed to capitalize on the systemic housing shortage and population migration to the Southeast.

As part of this latest transaction, Bonaventure Multifamily Income Trust – now with over $105 million in sales – will retain a majority stake in Attain Downtown and continue to oversee its operations. The company used the proceeds from the sale to acquire Cavalier Crossing through a tax efficient 1031 exchange. The combined transaction is representative of one of Bonaventure’s current investment tactics of extracting capital from stable core assets and redeploying it into undervalued or mismanaged value-add opportunities with the potential for higher returns on a risk-adjusted basis.

Specifically, Bonaventure said it sold fractional ownership of Attain Downtown as a custom solution for an investor seeking to utilize the 1031 exchange. The sale was structured as a tenancy-in-common transaction, which allows multiple investors to own undivided interests in a single property and defer capital gains taxes through a 1031 exchange.

Cavalier Crossing is the latest addition to Bonaventure Multifamily Income Trust’s 20-property portfolio. Since its inception in 2021, the trust has acquired properties, many of which have used custom-built 1031 or 721 exchange programs under the Internal Revenue Code. Many of these solutions cater to investors seeking stable cash flow from multifamily properties without direct ownership and active management.

“This transaction represents one of the many customized solutions we can offer our clients to solve their 1031 exchange needs, while also helping us grow strategic new partnerships,” said Dwight Dunton, Bonaventure chief executive officer and founder. “The 1031 transaction type allows for all involved parties to benefit. Bonaventure Multifamily Income Trust retained an ownership stake in Attain Downtown and continues to manage the property, and the new co-owner enjoys the potential for risk-adjusted returns without having to actively manage the property.”

Attain Downtown offers studio, one-, two-, and three-bedroom units with luxury finishes, walk-in closets, stainless steel appliances and energy-efficient designs. Amenities include a saltwater pool, 24-hour fitness center, gas grills, fire pits, and EV charging stations. Its prime location provides residents with easy access to dining and convenience options along Granby Street and proximity to the Historic Freemason District.

Bonaventure used the proceeds from the fractional sale of Attain Downtown to acquire Cavalier Crossing. Constructed in 2003 and located near the University of Virginia and a Wegmans-anchored retail center, Cavalier Crossing will undergo a comprehensive renovation to upgrade unit interiors, amenities, and curb appeal. Bonaventure will enhance the existing amenity package which already includes a swimming pool, fitness center, basketball court, and volleyball court, to deliver an upscale community in a market where demand significantly outpaces supply.

“The acquisition of Cavalier Crossing aligns perfectly with our current acquisition strategy of identifying undervalued assets in growth markets that offer significant potential for value creation. By leveraging our nearly 25 years of success in multifamily development, we plan to reposition this well-located property into a thriving multifamily community,” Dunton added.

According to Bonaventure, the Charlottesville rental housing market is marked by high occupancy rates and limited new supply in the development pipeline. Charlottesville’s economy, driven by its status as a hub for education, healthcare, and technology, makes it an ideal location for multifamily investment. The University of Virginia not only contributes to a stable demand for housing but also anchors the community with its medical center, the largest employer in the area.

Bonaventure Multifamily Income Trust allows high-net-worth investors to participate in institutional grade real estate by offering individuals the opportunity to invest in a diversified pool of assets with attractive risk-adjusted returns, stable cash flow, and tax advantages. To date, the fund has 3,790 units and over $1 billion of gross assets under management in its portfolio which has a weighted average loan maturity of over 20 years.

Through its fund, other investor offerings and tax-advantage investing, Bonaventure focuses on the investment, development, construction, and management of innovative lifestyle multifamily communities in the mid-Atlantic and Southeastern regions. It is headquartered in Alexandria, Va.

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Fredericksburg’s landscape is evolving with the introduction of Attain at Towne Centre, a new 271-unit residential development at the site of the former Sears at Spotsylvania Towne Centre. This project, completed by Bonaventure in partnership with Cafaro Properties, owner of Spotsylvania Towne Center, promises to bolster the local economy.

Dwight Dunton, CEO of Bonaventure, highlighted the project’s dual benefits during a ribbon cutting ceremony in April 2024: “The introduction of Attain at Towne Centre heralds a significant positive impact on the local economy through various channels, including job creation, increased tax revenues, and sustained economic growth.”

The development replaced a Sears store, which was demolished to make way for the new construction, and has already created over 380 construction-related jobs and is expected to generate over $1.15 million in tax revenues. “Property taxes increase with the development of Class A residential units, providing a substantial source of income for local governments,” added a representative from Attain.

The rental prices at Attain at Towne Centre vary by unit size, with a one-bedroom unit available for $1,607, two-bedroom units starting at $1,779, and three-bedroom units priced at $2,516. Each unit features modern amenities and spacious layouts, with the square footage for one-bedroom units at 808 square feet, two-bedroom units at about 993 square feet, and three-bedroom units at 1366 square feet.

Bonaventure’s commitment to the community does not stop at this project. “Our partner Cafaro at Spotsylvania Towne Centre, renowned for their dynamic approaches to development, actively engages in ongoing conversations with retailers and restaurateurs,” mentioned the Bonaventure spokesperson. This ongoing collaboration aims to ensure the town center remains a vibrant hub for shopping and dining.

The trend of converting shopping malls into residential spaces is gaining momentum across the United States as developers seek to repurpose these areas to meet changing consumer and residential needs. This shift reflects broader economic and social trends influencing real estate development and community planning.

The trend of converting shopping malls into residential spaces is gaining momentum across the United States as developers seek to repurpose these areas to meet changing consumer and residential needs. This shift reflects broader economic and social trends influencing real estate development and community planning. Cities where this transformation is taking place include Plano, Texas; Santa Ana, California; Huntington Beach, California; and Vernon Hills, a suburb of Chicago.