The 432-unit apartment community at 1710 S. Gilbert Road was built in 1985 and is about 20 miles southeast of downtown Phoenix. During an ownership of almost three years, HZ undertook over $3 million in capital improvements to the property, including 216 unit upgrades, a roof replacement and clubhouse remodel.
The one- and two-bedroom units average 819 square feet and feature full-sized washers and dryers, vaulted ceilings, fireplaces, ceiling fans, and walk-in closets. Common amenities include four swimming pools, a fitness center, sports courts, dog park, and picnic and barbecue areas. At time of sale, occupancy was 96 percent.
“We executed on our value-add strategy at Gateway on Gilbert and were able to opportunistically sell the asset due to the strong Phoenix market,” said Kurt Houtkooper, HZ’s chief investment officer. “We look forward to a continued presence in this market.”
HZ has been in a disposition mode lately, selling 13 multifamily properties in 2016 thus far. Dome’s real estate portfolio totals nearly $1.27 billion, of which 94 percent are apartment properties located in 20 metro areas nationwide.
SAN FRANCISCO, CA—San Francisco-based real estate investment company Hamilton Zanze (HZ) and joint venture partner Dome Equities, a private equity real estate investment firm, sold Gateway on Gilbert Apartments to Capital Real Estate, LLC on July 1, 2016 for an undisclosed price. ARA Newmark represented the sellers.
The 432-unit apartment community was built in 1985 and is located at 1710 S. Gilbert Road in Mesa, AZ, approximately 20 miles southeast of Downtown Phoenix and at the center of several business corridors.
“We executed on our value-add strategy at Gateway on Gilbert and were able to opportunistically sell the asset due to the strong Phoenix market,” says Kurt Houtkooper, HZ’s chief investment officer. “We look forward to a continued presence in this market.”
During an ownership period of almost three years, HZ implemented over $3 million in capital improvements, including 216 unit upgrades, an extensive roof replacement, and clubhouse remodel. The one- and two-bedroom units average 819 square feet and feature full-size washers and dryers, vaulted ceilings, fireplaces, ceiling fans, and walk-in closets. Community amenities include four swimming pools, fitness center, sports courts, dog park, and picnic and BBQ areas. At time of sale, occupancy was 96%.
HZ has sold 13 multifamily properties in 2016 thus far. Dome’s real estate portfolio totals nearly $1.27 billion, of which 94% are apartment properties located in 20 metropolitan areas in the United States.
Summary of the Disposition
• 432-unit Class B multifamily property built in 1985
• Located at 1710 S. Gilbert Road, in Mesa, AZ (Phoenix MSA)
• Undisclosed price
About Hamilton Zanze
Hamilton Zanze is a private San Francisco-based real estate investment company that owns and operates apartment communities. Since its founding in 2001, Hamilton Zanze has acquired over $2.4 billion in multifamily assets across 10 states in the Western and Southwestern U.S. The company currently owns and operates 84 properties (18,068 units) across nine states. For additional information, visit www.hamiltonzanze.com.
About Dome Equities, LLC
Dome Equities, LLC (www.domeeq.com) is a New York City-based private equity real estate investment firm specializing in core+, value-add, and opportunistic strategies in U.S. real estate with a focus on multifamily rental properties. Dome’s mission is to deliver investment opportunities that provide strong, stable current returns while generating long-term capital appreciation. The firm applies a disciplined investment process marrying top-down economic and demographic research with bottom-up sourcing by accessing local knowledge via an expansive, scalable network of owners/operators. Management currently employs a strategy targeting investment in the multifamily apartment market. Always seeking profit creation as a core objective, Dome acquires apartment properties below their replacement cost, implements best-in-class management practices and invests strategic capital to improve property operations, followed by the sale to a long-term owner, all within a three- to five-year period.
Nonfarm payroll employment increased by 287,000 and the unemployment rate rose to 4.9% in June, according to the U.S. Bureau of Labor Statistics. Employment increased in leisure and hospitality, health care and social assistance, and financial activities. Following recent declines due to a strike by information services workers, employment also increased in information, mostly reflecting the return of workers from the strike.
Read more at BLS.gov
Owners cashing in on increasing property values — apartment owners in particular — are fueling tax-deferred 1031 exchanges and a corresponding high demand for replacement properties, according to National Real Estate Investor (NREI).
“There is a ton of 1031 money out there looking for an exchange,” Steve Hovland, director of research at HomeUnion, tells NREI.
Sale prices that are reaching peak highs in many metros are motivating even long-time owners to sell. Apartment sales transaction volume rose 12.0% year-over-year in Q1 2016, while cap rates fell another 20 basis points to average 5.7% nationally, according to research firm Real Capital Analytics (RCA).
Read more at NREIonline.com
Demand for rental housing is up among all income groups due to increasing number of Americans choosing to rent instead of buy, according to research published by the Joint Center for Housing Studies at Harvard University.
The number of renter households grew by 9 million in 2005 toto about 110 million in 2015. In 2015, renter households increased by 1.4 million, the biggest one-year jump on record.
MarketWatch.com notes the shifting composition of the housing market from ownership to renting is likely due to aging baby-boomers opting to rent. Harvard researchers found a smaller increase in rentership among householders under 30, pointing to decreased household formation among that age group.
The cost of renting is climbing about 3.7% annually, about twice the pace of wage inflation. Since 2010, the national rental vacancy rate has fallen every year, hitting a 30-year low of 7.1% in 2015.
Read more at MarketWatch.com
Tens of thousands of new apartments are now opening in central business districts (CBDs) nationwide, reports National Real Estate Investor.
The number of apartments in downtown submarkets is growing at a rate of 5% annually, on average. “That’s a huge number — particularly given that downtown areas are, by definition, smaller and more confined areas,” says Jay Parsons, vice president for apartment market intelligence firm MPF Research. “That means you have new apartments within walking distance of a ton more new apartments.”
According to data firm Reis Inc., the percentage of vacant apartments in downtown submarkets averaged 6.3% in the Q1 2016, up from 5.6% last year.
By comparison, the number of apartments in suburban markets is increasing by less than 2% annually and is expected stay under 2% for the foreseeable future, according to MPF Research.The percentage of vacant apartments in suburban areas averaged 4.2 % in Q1, up from 4% last year.
Read more at NREIonline.com
U.S. mortgage rates declined to their lowest point in 2016, at 3.54% for the week ending June 16, according to Freddie Mac. Rates were at 4% last year. U.S. home sales are expected to remain strong as a result of the historically low rates.
“The 10-year Treasury yield continued its free fall this week as global risks and expectations for the Fed’s June meeting drove investors to the safety of government bonds,” said Sean Becketti, Freddie Mac chief economist. “The 30-year mortgage rate responded by falling 6 basis points for the second straight week to 3.54% — yet another low for 2016. Wednesday’s Fed decision to once again stand pat on rates, as well as growing anticipation of the U.K.’s upcoming European Union referendum will make it difficult for Treasury yields and — more importantly — mortgage rates to substantially rise in the upcoming weeks.”
Read more at Freddiemac.mwnewsroom.com
New multifamily construction declined 1.2% in May after increasing by 11.9% in April, according to data from the Census Bureau and the Department of Housing and Urban Development. Meanwhile, building permits were up month over month and year over year.
Nationwide, new residential construction declined 0.3% from April, with new starts reaching a seasonally adjusted annual pace of 1,164,000, a 9.5% increase from the same period last year. Single-family housing starts increased 0.3% to an annualized 764,000, while starts in properties of five or more units reached 396,000.
Read more at GlobeSt.com
HZ is invested in nine of Forbes’ 2016 Fastest-Growing Cities. Austin (1st), Seattle (4th), Salt Lake City (5), Ogden (6), Denver (11), Phoenix (15), Portland (26), Boise (17), and Las Vegas (18) were all ranked among the top-20 U.S. cities for growth based on estimated population growth for 2015 and 2016, year-over-year job growth for 2015, 2015 gross metro product growth, federal unemployment data, and area median annual pay for college-educated workers.
Forbes highlighted Austin, TX, which topped the list for five of the past six years (last year it fell to second place). The metro’s projected 3.15% population growth rate in 2016 is the highest among the 100 metro areas the publication examined, growth credited to Austin’s job opportunities (employment expanded 3.28% last year).
Forbes also focused on Utah markets’ impressive growth. Salt Lake City jumped seven spots on the list with Ogden close behind, returning to the rankings after falling from the list last year. In 2015, Utah added 46,576 jobs, 19,399 in the Salt Lake City metro area and 8,497 in Ogden-Clearfield metro area, the governor’s office reports. Between 2010 and 2016, 121 companies accepted government incentives for relocating to or expanding in Utah, Forbes reports.
Read more and see the full list at Forbes.com
Nonfarm payroll employment changed little (+38,000) in May, while the unemployment rate declined to 4.7% in May, according to the U.S. Bureau of Labor Statistics. Employment increased in health care, while mining continued to lose jobs, and employment in information declined by 34,000 due to a strike by Verizon Communications employees. Verizon announced this month that union members have ratified the tentative agreements reached in May, ending the month-long strike.
Read more at BLS.gov