IInvestors see a gold mine in Valley apartment complexes.
One of the most recent examples came last month when three Mesa apartment complexes sold for a total of more than $ 354.5 million in a series of two-day deals, one having sold almost three times the price paid four years earlier.
In Ahwatukee, the Adante apartments on 48th Street and Chandler Boulevard were sold in January to MG Properties Group of San Diego for $ 145.3 million – well above the $ 85.3 million that Security Properties Residential of Seattle paid in 2017, according to Valley Real Estate Tracker. vizzda.com.
While the activity of large investment groups in the single-family housing market has been widely publicized as one of the main drivers of the double-digit increase in house prices in the Valley, their interest in multi-family complexes has increased. also sharply increased, particularly in Maricopa County, where thousands of out-of-state residents come to live.
This binge eating is fueled by several factors which all mean one thing to tenants: “There’s more money than ever in betting apartment rents to hit new highs” Bloomburg.com reported, citing a report from Real Capital Analytics that found investors spent $ 53 billion on multi-family real estate nationwide in the second quarter of 2021 alone.
The Ahwatukee deal involved a huge 578-unit complex comprising 32 three-story buildings on 25 acres. The sale price of $ 145.3 million represented a price of $ 5.7 million per acre, or $ 284.84 per square foot or $ 252,170 for each of the 408 one-bedroom apartments and 168 two-bedroom apartments. bedrooms.
The $ 40 million profit margin on this deal was nearly double the profit it made when Security Properties bought it in 2017 for $ 85.3 million, five years after the previous owner paid $ 61.1 million. , according to data from vizzda.
In Mesa, the three largest multi-family resort deals took place between November 29 and 30 and involved one of the West’s leading real estate investment firms, Los Angeles-based Tides Equities.
“We specialize in well-located, class B and Core Plus multi-family real estate with high added value,” the company boasts on its website, promising to bring “a strong sense of institutional quality acquisitions and operational efficiency in all areas of multi-family real estate. “
Tides Equities showed good judgment on November 29 when it sold a property it had bought four years ago for $ 47.2 million to another investment group for $ 137 million, according to vizzda. The next day, Tides Equities purchased two Mesa complexes for a total of $ 217.5 million.
Tides’ sale of Midtown on Main Street apartments in the 2100 block of W. Main Street was the fifth time the 472-unit complex has changed hands since 2005, according to Vizzda records.
Built in 1985 on 18.7 acres, Midtown first sold in 2005 for $ 20.5 million.
Tides sold the property to KKR & Co., a New York-based global investment firm that manages a wide variety of assets, including real estate and energy.
This transaction represented a selling price of $ 344 per square foot and $ 290,254 for each of its 186 one-bedroom apartments and 286 two-bedroom units.
While selling Midtown, Tides paid $ 133.25 million for the Tides at Mesa in the 2000 block of E. Broadway Road at S. Acacia Avenue, a 35-year-old, nearly 23-acre complex that was owned by IMT. Superstition Vista LLC, a subsidiary of IMT Residential, which owns and manages more than 17,000 apartments across the country.
The Tides at Mesa sale, at $ 318 per square foot, represented a unit price of $ 287,176 for each of the complex’s 464 apartments.
Tides also bought the Tides on Southern at Gilbert Road and Southern Avenue from IMT on November 30, paying $ 84.25 million – or $ 337 per square foot – for a 306-unit complex built in 1984 on 15 acres. The sale represented a unit price of $ 275,326.
Tides drew attention on its website to its expansion in Phoenix, with more than 50 acquisitions in the Phoenix metro market.
“Tides has remained active in the Phoenix market for the past two years. This year alone, we have acquired 19 properties in the Phoenix MSA, representing a transaction volume of approximately $ 1.2 billion, ”Sean Kia, co-founder and director of Tides Equities, told Multi- Housing News one week before the three Mesa transactions.
He also told the industry newsletter, “Favorable market conditions continue to stimulate demand in the Greater Phoenix area. … Robust population growth not only supports rent increases, but also attracts investors.
“Tides continues to believe in the short and long term growth of Phoenix as it is expected to lead the country in terms of job growth over the coming years and is further aided by the growing demand from millennials and Gen Z to move to Sun Belt cities, ”said Tides Co-Founder and Principal Ryan Andrade.
Multi-Housing News reported that Phoenix is not the only market where Tides is aggressively courting resorts, noting that it has acquired a series of Las Vegas sites for more than $ 313 million.
The bulletin added that Tides has acquired more than 80 resorts in the West over the past five years.
Part of the growing interest in apartment complexes, Bloomberg noted, involves a shift of real estate investors from offices, hotels and shopping malls, which he says “have done badly during the pandemic.” .
“The influx of money has driven up prices and forced private equity firms to behave like aggressive homebuyers in the frenzied housing market,” Bloomberg said. “Some investors are frustrated with the current prices of apartment buildings. But many are increasing their offers, forgoing inspections and promising to close quickly, with rising rents leading to a flurry of deals. “
He quoted an investment activist as saying, “This is what happens in a white-hot market. Some of them will sharpen the pencil on the next one and get a little more aggressive as they need to deploy that capital. “
Interest in apartment complexes has also been fueled by soaring home prices, which has hit first-time buyers and aging baby boomers anxious to downsize particularly hard, a number of analysts say.
Large investors don’t just look for apartment complexes for the long-term benefit of a constant income stream that rent generates.
The Cromford Report, which closely monitors the Phoenix subway housing market, noted that large investors are also buying single-family homes in bulk – and not returning them for resale.
Instead, the Cromford report noted that “investors are extremely interested in purchasing single family homes in Phoenix. Rent revenue is growing faster than anywhere else in the country.
“Rents are going up because more people want to rent than there are rental properties. Many families are beginning to view single-family rentals as preferable to apartments or condo-style rentals. This effect is probably supported by living conditions during a pandemic.
“As this continues, we can expect investor demand to remain robust, which in turn keeps the market from cooling down as it would if regular homebuyers were the only source of demand.”
Manage Case, a company that manages apartment complexes, echoed this appeal of rent to investors.
“There is not much to support a prediction other than rising rent prices,” he said. “Those who hope for a lull in the upward trend in prices will likely be disappointed.”