PORTLAND — The new owner of Bayside Village Student Housing plans to continue operating the building as apartments for college students for at least the next 18 months, but will soon begin reconfiguring the units.

Converting some units to one- and two-bedroom apartments might help solve the property’s chronically high vacancy rate, said Dung Lam, managing director of Federated Cos., which bought the 100-unit, 400-bedroom complex on Marginal Way last month. Every unit now has four bedrooms off a central kitchen and small living room.

Lam said current tenants’ response to the new ownership has been positive and the company is already signing leases that cover the next academic year.

The operation of Bayside Village was taken over last summer by KeyBank, the original developer’s lender, which filed papers saying the developer had defaulted on the $20.82 million mortgage it took out on the property in 2007.

According to the documents, the building was only 40 percent occupied last spring.

KeyBank sold the building to Federated in December. That company, based in Boston and Miami, said it has developed about 7,500 housing units in apartment complexes, many of them in New England, with a total value of more than $1.5 billion. This is its first project in Maine.

The company also develops commercial real estate for retailers.

Lam said the company sees great promise in the building on Marginal Way because it’s relatively new and the construction quality is “condo-grade.”

He said that one- and two-bedroom units would appeal to upperclassmen and graduate students, who might prefer having no roommates or only one, as opposed to the three roommates most renters have now in Bayside Village.

“It didn’t offer a variety of units” as it was originally configured, Lam said.

Lam said his company plans to convert at least half of the 100 units to smaller apartments, some of which could be available as early as this summer.

Last week, the City Council approved transferring Portland’s tax increment financing agreement with the original developer to Federated. That agreement provides the owner with as much as $120,000 a year for 11 years as long as the property is valued at a minimum of $18 million and it’s used for student housing. The payment is reduced if the minimum valuation is not maintained.

Lam said Federated Cos. has discussed other uses for the building with city officials, such as opening it to non-students, which would require a renegotiated TIF or forgoing the city payments. Given the leases being signed now, he said, no change in use is contemplated before mid-2012.

 

Staff Writer Edward D. Murphy can be contacted at 791-6465 or at:

[email protected]