Author Topic: $28.2 million or approx. $72k per unit.  (Read 2238 times)

TheCat

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$28.2 million or approx. $72k per unit.
« on: December 23, 2012, 01:32:45 AM »
That's how much Atlanta's Cortland Partners bought Avistele at Deerwood apartment complex.

Quote
Atlanta-based Cortland Partners acquired the 390-unit Avistele at Deerwood, off of Southside Boulevard, from Knoxville, Tenn.-based Renaissance Property Group LLC.
The community was built in 1986.
Cortland Partners also recently acquired two adjacent apartment complexes on Jacksonville’s Northside.
http://www.bizjournals.com/jacksonville/news/2012/12/10/southside-apartment-complex-sells-for.html?iana=ind_cre

ChriswUfGator

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Re: $28.2 million or approx. $72k per unit.
« Reply #1 on: December 24, 2012, 12:59:25 AM »
Unless they're planning on going condo, I don't know how you can make any money at these prices. I guess unless you're happy with a 3% cap rate, or you (mistakenly) think that the economy is anything other than one big cycle and the mortgage market will never come back, allowing you to jack rents in the face of allegedly-increasing market demand to make up for overpaying on the purchase. In which case you're not going to be a happy camper shortly. At those prices, why not just stay home rather than doing all that work for no money. You could do better in a poorly managed mutual fund. I don't get it.


tufsu1

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Re: $28.2 million or approx. $72k per unit.
« Reply #2 on: December 24, 2012, 06:01:42 PM »
the apartment market has been quite profitable these days....rental rates of $1,000 a month will more than cover the purchase cost over time

simms3

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Re: $28.2 million or approx. $72k per unit.
« Reply #3 on: December 24, 2012, 06:29:49 PM »
I'm sure we all know what kind of debt Cortland was able to secure (can justify higher pricing with very strong debt), exactly what the cap rate on in-place was, and conversely what the in-place rental rates were/occupancy/concessions.  I'm sure we all know how the expenses are running at that property, just like I'm sure we all know how rental rate growth has been in that particular area over the past 3 or 12 months.

For an infill garden community with a lot of upside potential (new paint job, new microwaves or what not), and a heated rental market with more and more demand for mid-level product in the city as new, more expensive developments dominate all new units being constructed, I'm sure Cortland, with their many years of experience underwrote that deal with far more facts than we have at hand on this site.  FTR $72K/unit for a vintage infill B-class community doesn't sound that unreasonable.  It costs $100-$125K/unit for new suburban class "a" garden style construction, and it costs at least twice as much all-in for infill construction like that being constructed in Brooklyn.  If they are budgeting $20K/unit for improvements to bring it to B+ material just below new suburban garden style quality, and they are going to achieve typical suburban class A garden style rents based on location, then I'd say that's probably a great deal!

And nobody is dumb enough to pay less than a 5%, maybe even a 5.5% or 6% cap rate on in-place for anything in Jax.  It's not that kind of market...lenders won't support it and acquisitions teams all across the SE recognize this city for what it is: a risky opportunistic town subject to massive cycles.
Bothering locals and trolling boards since 2005

ChriswUfGator

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Re: $28.2 million or approx. $72k per unit.
« Reply #4 on: December 24, 2012, 09:27:56 PM »
Uh huh.

What I do know is that it's mighty hard to make any money at $75k/unit on a 20 year-old class B complex. Do the math. You can build brand new for almost the same price. The rental rates for that exact complex are freely available on their website, this is hardly some mystery, the cap rate has to be under 6% it's literally 2+2=4 here Simms. On the silly "do you know who these people are" argument, do you want me to start naming the people with 30 years industry experience who went bust in the last few years? Math is math. I continue to be amazed at what the market will bear, or why anybody would even bother, like I said you can make more in a poorly managed mutual fund with a lot less risk.