Announcing the sale of 424 Apartments

We closed the sale of a 15 unit apartment building yesterday. It is a great example of how a fairly priced, decent condition building can fair in todays market.

This is a building built in 1963 and while it did not have any real deferred maintenance neither was it some renovated jewel-case. It was simply an average condition building with average size units in the North Capitol Hill neighborhood in the middle of a decent block with about 50% parking. In other words, nothing special.

As usual when we market a property we immediately broadly marketed the building, putting it into CBA, on our web site, and generally co-brokering with any and all interested agents. Within about a week we had five offers, several of them at the asking price. The top offer came from an out of town buyer who offered to complete due diligence within five days and close all cash within 21 days. A truly extraordinary offer.

The impetus for this property coming to market was an unsolicited offer that was for $225,000 less than we were able to get by actually bringing the deal into the light of the open marketplace, despite assurances from the agent representing the offer that the seller could never do better.

In the end, the property traded for $140,000 per unit, $215 per foot, 12 times the gross rents, and a 5.19 CAP. Certainly no steal but evidence of how a property priced decently and broadly marketed can attract a lot of attention and find the needle in the haystack, the buyer willing to do better than the rest.

Happy Holidays from All of Us at Pearce

It seems fitting to end this year, which has been so difficult for many in the real estate market, whether as client, agent, or vendor, by wishing everyone a happy and healthy 2012, with increased business for all!

Where Retail Goes, Will Real Estate Follow?

Retailers seem very happy with sales so far this holiday season.  Even booksellers, according to today's New York Times, have been seeing big increases.  Given the lackluster sales in the past few seasons, this seems to indicate that consumers have loosened their purse strings.

What does that mean for real estate?  While the fact that someone will buy a book doesn't necessarily mean that they will buy a house, the fact that someone won't buy a book almost certainly means that they will not make a large purchase like a house.  So it's a prerequisite that consumers have to feel more confidence before the real estate market will improve.  Hopefully, we're almost there.  Given the historic low interest rates, it's hard to believe that we haven't gotten there already.  Perhaps the start of a new year will push us over into a seller's market, or at least into a balanced one.

Management Fees

Does it seem odd that professional management of apartment buildings (and really all commercial property) gets paid on the top line rather than the bottom line?

Why can’t professional management be compensated as a percentage of the net rather than the gross? Then the management company interests are nearly identical to the owner interests.

Rising tide or sinking ships?

Twenty years ago we had a huge increase in the number of new apartments built. Most were in the outlying areas like Kent, Federal Way, Montlake Terrace, etc. Now they are all showing up on Queen Anne, Capitol Hill, Interbay, and West Seattle. The last surge of new construction of apartments in the 1980’s delivered huge projects in the outlying areas and small (20-30 unit) projects in the urban core. Now the huge projects are showing up in the urban core.

What is going to happen to the existing “old” stock of apartments? Will they still be appealing when compared to new product with free wi-fi, in unit washers & dryers, community rooms. Did theses close-in properties survive and/or thrive simply because they are close-in and how will they compete with the new product designed towards the next generation? Will size even matter to the Gen Y group or will they trade that for conveniences like living over a grocery store and coffee shop?
Somehow this feels similar to the 1980’s but a lot different too. As usual, only time will tell.

Assessment Woes

The City of New Haven has just released its new assessment figures, and there is a lot of talk in the media (see particularly the last couple of articles in the New Haven Independent) about tax increases by neighborhood.  As I've blogged about before, East Rock is the neighborhood in New Haven that stands out as having held its value over the past years of decline (Spring Glen in Hamden is the other one that really distinguishes itself).  Because so many areas in our region, let alone the core city, have gone down in value since the peak of the market, East Rock stands to have higher tax increases in the upcoming revaluation.

While one could look at that from a negative point of view, the real key here is that values have held up in that neighborhood, despite plenty of bad economic news and job loss around the region and the country.  Although that may cause taxes for people there to rise, they are not going to be underwater in value, as so many others are.  And that's certainly good news.