Real Deals: Triangle apartment sales hit record high in 2013

01/02/2014 10:23 AM

01/02/2014 10:25 AM

For the second consecutive year, the Triangle has set a record for the total dollar amount of apartment transactions completed in a single year.

Forty-nine apartment buildings sold for a sum of $1.334 billion in 2013, according to real estate firm CBRE. That total isn’t the final tally for the year, but it beats the previous record of $1.16 billion set in 2012.

The question now is whether investors’ interest in the Triangle will cool in 2014 as the market absorbs a large number of new units that are scheduled to be completed over the next 12 months.

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.

In the short-term, that’s likely to put downward pressure on both rental rates and occupancy levels.

Still, at this point there are no signs that the pace of deal-making is slowing. According to property records, there were a number of sales in the last week of the year that are likely to push the final tally for 2013 higher.

• Brookfield Property Group paid $63.8 million for three Raleigh communities: Remington on the Green, Trinity Park and Courtney Place. The seller was DRA Advisors.
• First Market Properties of Miami, Fla., paid $8 million for the Brentwood East apartments in North Raleigh. The seller was Drucker & Falk.
• Grubb Properties paid $8.8 million for the 254-unit The Beckanna on Glenwood apartments just inside the Beltline in Raleigh.

Todd Williams, Grubb’s senior vice president of investments, said the Charlotte-based company plans to upgrade The Beckanna’s amenities by building a new pool and clubhouse and improving and more than doubling the size of the fitness center. The property will be renamed the Sterling Glenwood Apartments.

Williams has heard the growing concerns about over supply in the Triangle, but he says what is frequently overlooked is how demand for new apartments – particularly among people in their 20s – is growing in the region.

“I think Raleigh’s probably one of the top 10 demand markets in the country, some people put it inside of the top 5,” Williams said. “We’re actually very bullish on it. We think the dynamics of the Triangle market are very unique, it is attracting millennials like nobody else and those are exactly the candidates for multi-family housing right now.”

Record valuations

In the first quarter of next year, Grubb plans to break ground on a 204-unit complex in Raleigh’s Glenwood South district where a number of apartment communities have recently opened or are under construction.

While there is a possibility of overbuilding in some areas of the Triangle, Williams said Grubb is a long-term investor.

“Whether we have a cyclical problem because of supply in a year or two doesn’t bother us as much as making sure we’re making the investment in the right overall market,” Williams said. “And we think Raleigh certainly is that.”

Driving such optimism is the astronomical valuations that several Triangle apartment communities have earned in recent months. St. Mary’s Square, a 134-unit project near Glenwood South that opened this fall, set a record for the most paid for a Triangle apartment complex on a per-unit basis when it was acquired for nearly $204,000 a unit.

Grubb’s new Glenwood South project, to be built under the company’s Link brand, will offer similar sized units at similar price points.

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