Partners acquire 4 apartment properties
Nearly 1,000 Valley units bought in $103.1 mil deal
Yvette
Armendariz
The Arizona Republic
Jan. 3, 2007 12:00 AM
Four
Phoenix-area apartment properties with nearly 1,000 units sold for $103.1
million to a real estate partnership seeking to renovate the properties.
Phoenix-based Alliance Residential Co. partnered with Boston-based AEW Capital
Management to pick up the four properties and 11 others in Tucson, Albuquerque and Las Vegas in a deal that closed in late December.
Alliance declined to give the value of the portfolio sale or information on
the seller, citing confidentiality. More than $500 million is tied to the deal,
including renovation costs, said John Cunningham, Alliance's managing director
for acquisitions.
A search of county records show the Phoenix properties were sold by New
York-based DRA Advisors for a combined $103.1 million.
Alliance was attracted to the portfolio of properties because of their
location in fast-growing Western markets and their value, Cunningham said.
"We could buy them cheaper than we could build them," he said.
"They are all well-located assets."
Renovations, which will begin in the first quarter, may include upgrades such
as countertops, flooring and amenities, depending on the property, he said.
About 100 employees will be added in the five markets to help manage the new
properties.
Apartment owners have benefited from a slowdown in housing construction and
housing costs that soared in 2005. The result has been declining vacancy rates
since the second quarter of 2004, as well as rental growth, said Pete TeKampe
of Marcus & Millichap.
Rents stood at a record high, he said, averaging $751 Valley-wide in the third
quarter of 2006. That's $48 higher than a year earlier.
Meanwhile, vacancies were 7.7 percent in the third quarter of 2006, down a
10th-straight quarter. The vacancy rate was 11 percent in the second quarter of
2004.
That has many investors eyeing Phoenix, TeKampe said.
But rental growth may be slowing down, based on his Phoenix Projected Apartment
Income Index, which looks at several factors such as housing affordability and
the cost to rent vs. ownership. He said that data suggest that apartment owners
may no longer be able to raise rents freely and may instead start offering more
concessions going into 2007. Apartment income drops when vacancies are high and
concessions, such as free rent or gifts, grow larger.
The local properties give Alliance about 10,000 apartment units at 21
properties in the Phoenix market.
This acquisition is part of $1.5 billion in deals via acquisition or
development Alliance did in 2006. The company has a $3 billion portfolio in 11
states.
Reach the reporter at yvette.armendariz@arizonarepublic.com
or (602) 444-4842.