Chandler apartment complexes are selling at record prices - SanTan Sun News SanTan Sun News

Chandler apartment complexes are selling at record prices

January 18th, 2022 development
Chandler apartment complexes are selling at record prices
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By Paul Marinyak, Executive Editor

The rush by major investors to gobble up apartment complexes at eye-popping prices came to Chandler big time in recent months.

Five Chandler complexes since August sold for twice to three times the price paid by their previous owners within as little as 13 months and no longer than six years, according to data compiled by the Valley real estate tracker vizzda.com.

Those sales reflect an ongoing pattern by large real estate investment companies, whose interest has been piqued by steadily increasing rents in a tight housing market in Maricopa County, where thousands of out-of-state residents are coming to live. Throughout the East Valley, eight- and nine-figure deals have been consummated within the past 12 months, data show.

“There’s more money than ever betting that apartment rents are heading to new heights,” Bloomburg.com reported, citing a Real Capital Analytics report that investors spent $53 billion on multifamily real estate nationally in just the second quarter of 2021 alone.

They and other experts also point to the fact that rent offers a steady long-term income stream largely unaffected by the economic fluctuations that impact the re-sale and new single-family market.

The five recent mega-transactions for Chandler complexes included:

• The October sale of the Greens Apartments at 125 S. Alma School Road for $125.3 million – nearly three times the 2015 sale price of $46.2 million. That sale by the Phoenix-based Conam Group of Companies to Decron Properties of Los Angeles worked out to $186,250 for each of the 324 apartments spread out across 28 two-story buildings.

• The September sale to Windemere Investments of Texas of the Soleil Apartments at 725 No. Dobson Road for $63 million – less than two years after the seller, 3rd Avenue Investments of Phoenix, bought the 188-apartments-turned-condo complex for $40 million. That represented a per-unit price of $335,106.

• California-based Davlyn Investments’ Dec. 15 acquisition of the 280-unit Broadstone Trevio on S. Ellis Street for $114.4 million – more than twice the $47.5 million price that seller TruAmerica Multifamily paid for the 16-year-old complex in 2015.

• The purchase by Scottsdale-based Private Portfolio Group and subsidiary Pillar Communities of the 116-townhouse complex called Villas at Chandler Heights last month for $55.1 million only three years after The Carte Group, the seller, bought it for half that price.

• Last month’s sale of the Marquis at Chandler complex at 2200 W. Frye Road by Pacific Coast Capital Partners to Texas-based CWS Capital Partners for $150 million – 11 months after Pacific bought it for $95 million.

That transaction represented a price of $441,176 for each of the Marquis complex’s 340 apartments that are spread across nine four-story buildings.

Both Decron Properties and  CWS Capital Partners are real estate investment management companies with similar financial objectives.

CWS says on its website, “We seek investment opportunities with the primary objective of strong growth potential while maintaining preservation of capital.”

Stressing that  it is primarily a builder, Decron Properties states its development philosophy “blends land use, entitlement, and construction expertise with a vision that creates lasting value in real estate assets” as long-term investors in real estate.

Chandler by far is not the only East Valley community where mega-deals involving apartment complexes have occurred in the last 12 months.

Just across the I-10 from Chandler, Sares-Regis Group of Newport Beach, California, last month bought the 312-unit Arboretum at South Mountain complex on Chandler Boeuilvard at I-10 for $118.3 million – far more than the $45.5 million it sold for in May 2016.

Earlier last fall, Tides Equities of California sold a complex it bought four years ago for $47.2 million to another investment group for $137 million. The following day, Tides Equities bought two Mesa complexes for a total $217.5 million.

Such transactions reflect what Bloomberg called a shift by real estate investors from  offices, hotels and malls, which it said “fared poorly in the pandemic.”

“The influx of money has pushed prices higher and forced private equity firms to behave like the aggressive homebuyers in the frenzied housing market,” Bloomberg said. “Some investors are frustrated by current prices for apartment buildings. But many are raising their bids, waiving inspections and promising to close fast, with rising rents driving a flurry of deals.”

It quoted one investment activist as stating: “That’s what happens in a white-hot market. Some of them will sharpen the pencil on the next one and get a little more aggressive because they need to deploy that capital.”

According to a number of analysts, the interest in apartment complexes also is being fueled by soaring home prices that have especially impacted first-time homebuyers and aging baby boomers anxious to downsize.

Large investors also aren’t just looking at apartment complexes for the long-term benefit of a steady revenue stream that rent delivers.

The Cromford Report, which closely watches the Phoenix Metro housing market, noted that large investors also are buying single-family homes in bulk – and not turning them over for resale.

Instead, the Cromford Report noted, “investors are extremely interested in purchasing single-family homes in Phoenix. The receipts from rents are rising faster than anywhere else in the country.

“Rents are rising because there are more people wanting to rent than there are rental properties. Many families are starting to see single-family rentals as preferable to apartments or condo-style rentals. This effect is probably supported by living conditions during a pandemic.

“While this continues, we can expect investor demand to remain robust, which in turn prevents the market cooling down as it would if ordinary home buyers were the only source of demand.”

Manage Case, a company that manages apartment complexes, echoed that lure of rent for investors.

“There is little to support any prediction other than rising rent prices,” it said. “Those hoping for a lull in the rising price trend will likely be disappointed.”

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