What Made Sense Before The Crash Has Flipped
A weekend look at multi-family housing starting with the Northern Nevada Business Weekly. “The Reno market is increasingly attractive to out-of-state investors. ‘Investors in Reno don’t see the same value as investors from San Francisco or San Diego,” Kenneth Blomsterberg, first vice president investments with Marcus & Millichap, said in a phone interview with NNBW. ‘Ten years ago they wouldn’t have considered Reno.’ Investors ‘are chasing yields,’ he said.”
“Recently Blomsterberg brokered the sale of the 184-unit Willowbrook Apartments in Reno to Encinitas, Calif.-based The Apartment Company. It’s the fifth multi-family complex in Reno purchased by the company. They are C-class apartments in a B-Class neighborhood, Blomsterberg explained. ‘The goal is to reposition the property,’ Blomsterberg said. To ‘bring a C property to a B-minus, or a B property.’”
“Blomsterberg said his associates see a lot of multi-family property investors from the Bay Area, Sacramento and San Diego looking for property in the Reno area. Recently, a buyer from Omaha, Neb., began looking for a first investment in this market. Another investor from Vancouver, BC is ‘rooting around Reno,’ he said. Now, it’s not unusual to have 8-10 offers for a property from as far away as Connecticut and New York, Blomsterberg said. ‘The market is just red hot,’ he said.”
Crain’s Chicago Business in Illinois. “Condominium owners in a Lincoln Park high-rise have voted to sell the entire building to an investor that plans to convert it to apartments, possibly the biggest deal of its kind in Chicago. Strategic Properties of North America has agreed to buy Clark Place Private Residences, a 133-unit building, confirmed Sam Haddadin, president of the building’s condo board. The building, which was converted from apartments to condos in 2005, will become a rental property once again, a switch that’s becoming more common in Chicago amid the hot apartment market.”
“Historically, developers have preferred to convert apartments to condos. That made sense before the crash, when condo buyers were willing to pay higher prices for converted apartments than apartment investors would, creating an arbitrage opportunity for developers. But the market has flipped. Though condo prices are recovering, apartment values have soared even more in recent years, meaning the pricing spread works the other way.”
WFSU in Florida. “Leon County and Tallahassee’s changing property market is a big part of the race for property appraiser. Former Leon County Commissioner and architect Akin Akinyemi says some of the increase in student housing, has been driven by the federal government: ‘The federal government, in 2009, when they passed the recovery act, there was a hefty portion for student dormitory loans,’ Akinyemi said. ‘That really flourished the industry.’”
“At issue is whether Tallahassee is over-built in student housing. And Clay Ketcham says those larger, historical student complexes located far from the center of town are now experiencing cash flow problems. ‘Rent reductions, and they’re experiencing higher vacancies. With those two things. Their property is worth less than it was,’ he said.”
The Miami Herald in Florida. “A luxury condo project slated for Miami’s quiet Morningside neighborhood hasn’t been as popular as its developer, Venezuelan oil man Gerardo Pantin Shortt, had hoped. Sales have been suspended at Boulevard 57, an eight-story tower at 5700 Biscayne Blvd. where units start at $600,000, a spokeswoman for Pantin confirmed.”
“A strong dollar and weak economies abroad are crippling the foreign buyers who snapped up Miami properties over the past few years. Several new projects have been canceled or put on hold as sales slump, including Ion East in Edgewater and the Collection Residences in Coral Gables. Boulevard 57 had pitched its off-the-beach location as appealing to domestic buyers. But it appears they didn’t bite.”
“‘I think the industry expected the project to get put on hold,’ said Peter Zalewski, a South Florida real estate analyst. ‘They were a victim of market timing. I was invited to the launch party [last month] and at the time I told everyone I knew to go because I thought it would be the last launch party of this real estate cycle. … Going forward, you’re likely to see more projects get shelved.’”
From Planet Jackson Hole in Wyoming. “A last minute ‘tweak’ has turned into a full-time haggle as the mayor and town council try to incentivize workforce housing in the downtown core. Even as the town moves forward, opposition continues. At its July 5 meeting, the Jackson Town Council voted unanimously to allow short-term rentals in the downtown core as a bonus to developers for building workforce housing. The ordinance was amended to include a cap that will limit the amount of development possible—for the time being, in the small downtown core.”
“The cap, or governor, would limit the use of the short-term rentals bonus to up to 100,000 square feet. Councilman Jim Stanford, who had originally been against short-term rentals, voted for the ordinance, he said, because of the added cap. ‘It takes away some of my worries about ending up with a glut of high-end condos,’ he explained.”
