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September 3, 2014
Apartment Investments Capped Out?
Another apartment tower hits a high-price watermark in Atlanta as we fast approach our Multifamily & The Mixed-Use Revolution event Sept. 18 at the St. Regis (tickets here).
Investors have been willing to pay big for Atlanta apartments now for some months. We asked Cushman & Wakefield's Michael Kemether (iphone-snapped with partner Brandon Whitesell), who's one of our headliners at the upcoming event, why. Simply put: Atlanta's economy is back on track, and investors see us early in a recovery. “Now we're adding jobs at a pretty good clip. That, coupled with the phenomenon going all over the Southeast, which is an in-migration of residents who want to live in an urban environment,” he says.
Here's a great example for the apartment appetite: The Wilbert Group's Tony Wilbert blogged this week about Daniel Corp's big sale of 77 12th St, its marquee 330-unit apartment tower at its 12th & Midtown project. Daniel sold it to a Florida investor named John Joyce for $121M, or just shy of $400/unit.
Mike should know. He sells apartment complexes for a living. Most recently he brokered the sale of The Flats at Atlantic Station (here), a student housing project across from IKEA for Trimont. The project was picked up by Times Square Capital for nearly $16M, or $56k/bed. He and partners Chris Spain and Brandon are also currently marketing Solace on Peachtree, a 533-unit high-rise next to The Fox Theater on Peachtree. This feeding frenzy has led to compressed caps, Mike says—sub-5% for trophy urban properties. And there's an irony taking place: Some value-add apartments are actually fetching lower cap rates than stabilized brethren because investors expect to be able to raise rental rates with a little TLC, he says.
“I just saw a 1985 suburban deal, nothing out of the ordinary, with vinyl siding, just trade for a sub-5% cap,” says The RADCO Cos' Norman Radow. But compressed caprates are no secret, and no bubble, he says. “If you're buying at a 6% but you can finance on a floater from Fannie Mae at a 2%, the cash-on-cash going in is tremendous,” he says. “In this environment where yield is impossible to find, who cares about the exit?”
RADCO most recently purchased Keeneland Farms, a 439-unit apartment complex in Smyrna, and Brown Ridge, a 114-unit complex in Newnam, from Fannie Mae for $33.2M. It's the type of product Norman says he seeks: Underperforming assets that are marked-to-market. But those deals are increasingly difficult to find. “We lost a deal last week, a mid '60s deal with sewage backup and incidents of mold, and an institution bought it. I said, 'Really?!'” “The amount of assets we can buy is going down, there's no doubt about it.”
Bye Bye Brian!
We just learned yesterday that Jacoby Development's wunderkind Brian Leary has taken a job as head of commercial development for Crescent Communities. It's a huge move for Brian, who was one of the main architects for Atlantic Station, and one of the pioneers for the smart growth development movement. Brian's most recent stint with Jacoby comes after a term overseeing the BeltLine until 2012. Since rejoining Jacoby, Brian has spearheaded the developer's efforts on a number of projects, including The ONE Daytona mixed-use project.
Bisnow Makes the Inc 5000!
Okay, it's not the Fortune 500 top industrial companies or the Forbes 400 billionaires, but, hey, the Inc 5000 is pretty cool—the fastest-growing private companies in the whole US. And we ain't at the bottom, but actually toward the "top," at #1,643. With a 258% growth rate over three years. So, we'll take it! And profound thanks to you, our readers and event attendees, for helping make it happen. And for giving us the privilege of working in and for an industry that we love, that literally changes the face of America and does so much for the country every day. No punchline. Sometimes we gotta be serious.