In a record-setting deal that has apartment investors in the Triangle and across the country raising their eyebrows, local developer Northwood Ravin has agreed to sell a portfolio of seven properties to Associated Estates Realty Corp. for $323.9 million.
The portfolio includes two Triangle properties St. Marys Square in downtown Raleigh and the Lofts at Weston in Cary as well as three in Charlotte, one in Atlanta and one in Tampa.
The seven properties contain 1,606 units, with Associated Estates paying on average just over $200,000 per unit.
The purchase price for St. Marys Square, a 134-unit project near Glenwood South that opened this fall, sets a record for the most paid for a Triangle apartment complex on a per unit basis. Associated Estates paid $27.325 million, or nearly $204,000 a unit.
The previous high was last years sale of the Park & Market apartments at North Hills, which sold for $200,489 per unit.
Associated Estates paid $38.3 million, or $178,000 a unit, for the Lofts at Weston, a 214-unit project that is a joint venture between Northwood Ravin and Highwoods Properties. Four of the remaining five projects included in the deal are now under construction and are expected to open in the coming months.
Shift in strategy
The transaction represents a change in strategy for Northwood Ravin, which typically develops projects with the idea of owning them for an extended period. Northwood Ravin is a joint effort of Ravin Partners and New York-based Northwood Investors. The companys president and CEO, David Ravin, led Croslands multifamily group until it spun out on its own in 2011.
You cant always stay with one strategy because the marketplace is always changing, and multifamily in particular has been changing rapidly, Ravin said Wednesday. We saw an opportunity to recycle some capital, to return investments to our investors at a good rate and thought it was an opportune time to reposition ourselves.
He said Northwood Ravin isnt exiting the Triangle or the Carolinas, noting that the company has three active projects here: The Bradford in Cary, The Apartments at Palladian Place in Durham and The Edge in Chapel Hill.
Associated Estates, a publicly traded real estate investment trust based in Ohio, has been one of the most active apartment investors in the Triangle over the past 18 months. The company paid nearly $110 million for three Triangle complexes last year, including buying The Apartments at the Arboretum in Cary from Northwood Ravin for $39.25 million.
An Associated Estates executive didnt return a call seeking comment on Wednesday.
The high valuations for Northwood Ravins projects reflect both their urban locations and the strong track record that Crosland and now Northwood Ravin have in those markets. The company also has been able to beat many of its competitors to market with new projects.
The reason our portfolio had a lot of market appeal was it was further along than a lot of other people, Ravin said. We got out in front in a lot of these markets with what we think is very good product.
St. Marys Square, which began preleasing in June, is already 90 percent occupied.
Peak of the market?
The question now is whether this sale will end up being the peak of the market or just another notable high for an asset class that has had a remarkable run over the past few years.
Northwood Ravins timing could end up looking prescient given all the new projects slated to open in the Triangle.
The inventory of apartment units in the region is expected to expand by 6.8 percent over the next 12 months, the fastest rate of expansion of any market in the country, according to MPF Research, which analyzes apartment data in 100 U.S. metro markets.
Ravin said he expects the pace of apartment sales to slow in the near-term as investors wait to see how all the new inventory performs.
I dont think a lot of people are going to buy them without seeing some sort of historical data, he said.
If theres a danger, its that a lot of that new inventory looks awfully similar.
Weve put a lot of product in the exact same market going after the exact same potential renter, Ravin said. There hasnt been, I believe, enough diversity of development. We all sort of thought Well, urban is working, so everyone went and did the same urban project for the same end user. That may complicate the data in the short term. I think long-term it will be fine. Its just a lot of projects in the same location.
Bracken: 919-829-4548; Twitter: @brackendavid