Q2 2012 Phoenix, Arizona Apartment Property Sales Analysis

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Q2 2012 Phoenix, Arizona Apartment Property Sales Analysis

Metro Volume and Pricing

Investment in apartment properties remains strong.* The $1.08 billion exchanged in 55 transactions during the first half of 2012 amounted to 77.2% of the dollar total for all of 2011—and exceeded the annual totals for 2010 and 2009. The total for the second quarter alone, $592.3 million for 33 sales, amounted to the largest single-quarter total recorded by the firm for this market since the third quarter of 2007. The average selling price for second quarter’s transactions was $63,000 per unit. The year-to-date average was $73,000. In the latest quarter’s largest sale, AG-ICC Haven Owner LLC paid Petra Capital Management $46.5 million ($70,455 per unit) for The Haven, a 660-unit Class A property in Tempe. The all-cash foreclosure sale closed in May.

Since the quarter ended, Waterton Associates LLC paid $61.3 million for the 94%-occupied Andante Apartments property at 48th Street and Chandler Boulevard in Chandler, the Journal reported in August. JPMorgan Real Estate, operating under its Andante Acquisition Corporation, was the seller. In July, the Journal reported at the time, Acacia Capital Corporation paid $28 million, for the 90%-occupied, 341-unit Vista Montaña Apartments in Gilbert. The seller was VM Associates Limited Partnership, which had owned the property since 1988. Earlier that month, New York-based Angelo, Gordon & Co. LP partnered with Slavin Multifamily Advisors LLC to spend $42.5 million in the acquisition of the 412-unit Villa Salerno Apartments. An entity controlled by Colony Realty Partners sold the community, according to the Journal.

Top Submarkets

Property volume traded over the last four quarters, significant in a number of local submarkets, was led by South Tempe’s 3,296 units, which traded for $314 million at a relatively high average selling price of $95,182 per unit. Peoria-Sun City-Surprise followed with 2,873 units selling for $237 million at an average of $82,484 per unit. The 2,127 units sold in North Tempe fetched $171 million at a mean price per unit of $80,621. The highest average price, for 1,661 units traded, was claimed by North Scottsdale at $124,230 per unit. Central Phoenix South had more than 2,000 units sold while more than 1,750 were dealt in South Mesa.

Cap Rate Comparisons and Forecasts

While fluctuating, average cap rates measured by the quarter have held to the range of 6.3% to 7.8% since the third quarter of 2009. The average for second quarter 2012 was 7.6%. The 12-month rolling cap rate, steadier and close to 7.0% over the same span, ended the quarter at 6.9%, same as the preceding two quarters, down from 7.3% a year earlier. Reis expects the 12-month rate to run in the vicinity of 7.0% in the period ahead. Second quarter 12-month rolling rates for the Western region and the U.S. were 6.3% and 6.5%, respectively, both unchanged from the quarter before.