Mankato student housing complex sells for $70M

August 3, 2022

By: Brian Johnson

A 524-unit student housing complex near Minnesota State University in Mankato has sold for nearly $20 million more than the property fetched in 2021.

KB Grove at Mankato DST, an entity related to Kingsbarn Realty Capital of Las Vegas, paid $70 million for the complex at 200 Briargate Road, 100 Briargate Road, 240 Jaycee Court and 235 Jaycee Court, according to a certificate of real estate value made public Wednesday.

The Grove At Mankato Interior Swimming Pool View

The seller, also a Kingsbarn entity, is KB Mankato LLC. The sale included a $28.39 million down payment. KB Mankato LLC, working with Interstate Development, paid $49.5 million for the property in 2021.

“We purchased the Mankato student housing property to complete a ‘value-add’ program,” Kingsbarn CEO Jeff Pori said in an email Wednesday. “We have now completed the program and we will be offering our investors the opportunity to purchase fractional ownership (DST Structure) in the property for the purpose of completing a 1031 exchange and for cash flow. The property was sold to the Delaware Statutory Trust, which is on title, and the investors will be purchasing shares in the Trust.”

Kingsbarn Realty Capital announced in June 2021 that it acquired the 26-building complex, and that it would offer the property as a Delaware Statutory Trust investment by KB Exchange Trust, an affiliate of Kingsbarn.

The DST investment structure is “very useful in helping investors diversify their real estate portfolios in a much easier fashion than attempting to purchase multiple properties on their own,” according to Kingsbarn.

Kingsbarn says on its website that the property was built in four phases from 1973 to 2016 and that a “substantial renovation” was expected to wrap up this summer. Kingsbarn CEO Jeff Pori said Wednesday the $5 million-plus renovation will be completed within a couple of weeks.

As part of the renovation, workers are upgrading the “common areas and amenities, including a new clubhouse area, state-of-the-art fitness center, resort-style pool and dog park,” the Las Vegas investor said.

Pori said the 2021 sale closed during the heart of the pandemic, which was one reason it was available for a good price.

In a June press release, Pori said the purchase was “an example of an opportunistic acquisition in which we were able to buy the asset at a significant discount due to the short-term market trepidation caused by the COVID-19 pandemic. We like that this community is over 95% occupied and has a long history of performing at or above the surrounding submarkets.”

Finance & Commerce previously reported that the $49.5 million sale was one of the top apartment transactions of 2021. Longtime owner Bob Casselman was the seller.

Casselman owned the property for more than 40 years and did a number of expansions, Steve Michel, president of Michel Commercial Real Estate, told Finance & Commerce in April 2021.

“Every 10, 15 years, he expanded and built another section of it,” said Michel, whose company represented the buyer and the seller in the 2021 deal. “So there’s four different sections built in four different areas.”

Ultimately, the seller “determined he was going to move into a lesser-taxed state before his time was up, and so we did a 1031 exchange into a building in the southeast,” Michel said.

The apartments are 70% to 80% student-occupied, but the complex is leased and operated as a “traditional apartment community with 12-month leases and is rented by the unit rather than by the bed,” Kingsbarn said.

Kingsbarn Realty Capital has more than $1.5 billion of assets under management throughout the U.S., according to its website.

Read the full story here: Finance & Commerce