Q2 2012 Orange County, California Apartment Property Sales Analysis

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Q2 2012 Orange County, California Apartment Property Sales Analysis

Metro Volume and Pricing

Single-property sales activity picked up during the first quarter and rose again during the second as 14 properties changed hands for a combined total of $232.3 million at an average selling price of $186,000 per unit.* The total for all of 2012 through mid-year was 21 sales for $341.5 million, up from the 16 deals for $168.1 million made during the first half of 2011. In the latest quarter’s largest deal, the second largest in a year, Essex Property Trust paid RP/Essex Skyline Holdings LLC $85.0 million ($243,553 per unit) for the 349-unit Essex Skyline property in Santa Ana. The transaction closed in April at a 5.4% cap rate. The 2008-built Class A property was 11.0% vacant at sale date.

Top Submarkets

With 635 units selling for $158 million, Laguna Beach-Dana Point claimed the largest volume of property sold and the largest dollar volume all told over the past four quarters. Buena Park followed in property total at 500 units, which traded for $57 million. Second in dollar volume was Huntington Beach, where 376 units were transacted for $87 million. The 349 units sold in South Santa Ana fetched a total of $85 million. The Laguna Beach-Dana Point and South Santa submarkets had average prices calculated at higher than $240,000 per unit. Huntington Beach followed at about $231,000.

Cap Rate Comparisons and Forecasts

The average cap rate for apartment deals in Orange County, relatively steady over the recent term in the range of 5.0% to 5.5%, jumped to 6.6% in the second quarter. The 12-month rolling cap remained essentially flat, ending the latest quarter at 5.5%, up from 5.4% and down from 5.6% one and four quarters prior, respectively. Second quarter 12-month rolling cap rates for apartment transactions in the Western and U.S. apartment markets were 6.3% and 6.5%, up from 6.2% and unchanged, respectively, from a quarter prior.