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Caviata price portends boost in apartment sales

ROB SABO
rsabo@nnbw.biz

Apartment sales

1999-2012

Properties with 80 or more units

Year units sold

1999 1,348

2000 1,071

2001 2,686

2002 3,348

2003 1,090

2004 4,755

2005 2,593

2006 1,632

2007 2,227

2008 1,036

2009 228

2010 100

2011 745

2012 1,669

Source—CBRE

Apartment-complex sales in northern Nevada may not reach levels seen in 2012, multi-family brokers say, but per-unit prices have soared to pre-recession levels as rents firm and occupancy trends downward.

The acquisition last quarter of Caviata at Kiley Ranch Apartments for $24.4 million, or $133,000 per door, was a 24-percent increase over the per-unit pricing of $108,000 for a sister property located just across Sparks Boulevard, says Aiman Noursoultanova, vice president of investment services with CBRE, which brokered sale of the Waterstone Apartments.

The hike in cost points to continued improvement in the Reno-Sparks apartment market, as well as diligence by investors outside the region to find profits in northern Nevada properties.

“The market is firming,” Noursoultanova says. “Rents have improved significantly as illustrated by the price per unit. The multi-family market is improving in terms of rents and occupancy, and concessions are at all-time low — especially for a Class A asset like this.”

One difference between the two sales, though: Caviata was acquired out bankruptcy by Tilden Properties of Walnut Creek, while Waterstone was an REO property. Still, Noursoultanova notes, the price per unit on the Caviata deal was perhaps the highest seen in the region since the recession.

Caviata — originally constructed as a condo property — benefitted from consistently high occupancy and top-tier status among regional apartment communities.

“It is a very high-quality asset, Noursoultanova says. “The finishes, and levels of improvements are really Class A. It has attached garages, it is very spacious with granite and stainless steel — it’s definitely a good, quality property.”

Sales are expected to be strong throughout the year. In 2012 there were 1,669 units sold in properties with 80 or more units, CBRE’s multi-family division reports. By way of comparison, there were only 228 units sold in 2009 and just 100 in 2010.

With low-interest financing becoming more readily available, multi-family brokers expect 2013 to be a strong year for apartment sales. Ted Stoever, vice president of multi-family and investment services for Colliers International, says deals will continue to get done with aggressive money from California.

Investors are seeing capitalization rates of 6 percent, which means a roughly 6-percent return on their unleveraged investment, Stoever says.

“We haven’t seen that in six years. Multi-family always has been lucrative for investors because of the cash flow. But Reno lags behind California in the larger metropolitan areas where cap rates are concerned.”

The per-unit price at Caviata is pushing the envelope of profitability for investors, though. Similar transactions in 2012 include sale of The View Apartments on Selmi Drive and the Boulders Apartments at Summit Ridge Drive, which sold for $113,000 and $109,000 per door, respectively, at a 6-percent cap rate.

Apartment sales are expected to continue during the next three quarters, Stoever says, as investors who purchased over the past few years finally see enough equity in their properties to turn them over to the next buyer. The biggest stumbling block for future sales is lack of available Class A properties.

“Class A product like Caviata, The View and Boulders are getting more far between,” Stoever says. “We see a lot more Class C-type product, which has lot of expenditure and deferred maintenance, and they are also experiencing higher vacancies.”

In a smaller purchase, an investment group headed by multi-family and investment specialist Floyd Rowley of Johnson Group Commercial Real Estate closed on the Regency Park Apartments, a 96-unit property at 3200 Lakeside Drive. The $4.18 million price works out to $43,563 per unit at a cap rate of 8.5 percent. Rowley manages the LLC that purchased the property, which was built in 1965.