Apartment sale may signal a shift

Staff WriterDecember 18, 2009 

A Greensboro investment group has bought the 212-unit Huntington Athletic Club Apartments in Morrisville for $10.5 million.

The sale, one of 19 apartment deals completed in the Triangle this year, could be a sign that the wide gap between buyers and sellers is closing.

"I think the expectations are definitely changing," said Bo Bennett, who is part of an investment group led by Brant ley Properties that bought Huntington from Aimco, a Colorado real estate investment trust. "As to what's going to happen next year, my guess is there's going to be a lot of stuff coming on the market."

Brantley Properties owns about 40 apartment properties in North and South Carolina. As part of the deal, Brant ley assumed Aimco's debt, which amounted to about 80 percent of the $10.5 million sales price. The sale price was about $2 million less than Huntington's assessed value.

Aimco, which specializes in apartments, now has sold nearly $60 million in Triangle assets this year, including Williamsburg Manor in Cary, Lake Johnson Mews and Landmark Apartments in Raleigh, and Beech Lake Apartments in Durham.

REITs have been shedding properties for several reasons, including a desire to upgrade their portfolios or to raise cash that can be used to buy back shares of their stock while it's depressed.

So far this year, the Triangle's 19 apartment transactions have totaled $221 million, according to Raleigh real-estate company Apartment REP. That's a trickle compared with last year's record number of 52 transactions totaling more than $1 billion.

Sellers are having trouble coming to grips with new property values that are anywhere from 25 percent to 40 percent less than their 2007 peak, said Jim Scofield, Apartment REP's CEO. Meanwhile, buyers are looking to pick up distressed properties at a severe discount.

"There's just a huge gap between bid and ask," he said.

Scofield agrees the two sides are inching closer. But he said the high unemployment rate will continue to hurt rental rates and occupancy levels, which in turn will put downward pressure on apartment property values.

"Properties are probably worth more now than they will be later next year when some of these things manifest themselves and if interest rates start creeping up again," he said. "I chuckle when sellers tell me, 'Well, I'm going to wait until next year when things are going to get better.'"

Cooper Brantley, a partner with Brantley Properties, said his company remains bullish on the Triangle apartment market as a long-term investment.

"We just feel like the job prospects and the growth prospects in the Triangle - although challenging as it is everywhere right now - I think it's better poised to grow in the near future," he said.

david.bracken@newsobserver.com or 919-829-4548

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