Intracorp apparently saw the changing market conditions sometimearound the end of 2007 and, with the project well underway, beganworking with multifamily brokerage specialist Jeffrey Williams, apartner in the Pacific Northwest office of Chicago-based Moran& Co. "They wanted to take this out very quietly because theywere concerned about market perception; they did not want to looklike they were not committed to the market because they are,"Williams tells GlobeSt.com. "So we took it out to a very limitedaudience with not a whole lot of detail and pretty much all groupssigned confidentiality agreements."

|

Part of the deal with Sobrato was that Intracorp not scrimp onany of the finishes and complete the project as it would have beenfor sale. Intracorp's total development cost for the project wasnot immediately available."Nobody lost money and I believe somemoney was made," Williams says.

|

Brian Cox, a VP with Sobrato tells GlobeSt.com that whileSobrato didn't overpay for the asset it did pay a premium for aunique property. "This was an opportunity to buy a very highquality product with beautiful views that probably would never havebeen built as apartments," he says. "This was also an opportunityto invest in Seattle, where job creation has been very good andwhere we are looking very long term."Williams agrees. "You wouldn'tspend $48 million to build a 114-unit apartment complex in thatlocation," he says. "It's unique."The marketing materialsassociated with the sale estimate that the property can achieverents of $2.50 per sf. If the development had been stabilized atthat rate, Williams says a $50-million purchase price would havetranslated to a capitalization rate somewhere in the mid 4%range.

|

Cox tells GlobeSt.com that he doesn't think the $2.50 per sfrent level can be achieved. He believes somewhere between $2.20 and$2.40 per sf is more likely.Williams says the project is expectedto achieve at least a LEED Silver rating from the US Green BuildingCouncil. Prometheus Real Estate Group from Walnut Creek, CA, willmanage the project for Sobrato. Marketing is expected to begin inthe next couple of weeks.

|

If not the right time for condos it's definitely the right timefor apartments, as the multifamily market in the Seattle area isvery healthy right now. Williams says occupancies are generallystill in the mid-90% range and rents reportedly grew by 8% over thepast 12 months in the central city. Indeed, Williams says one ofthe mid-rise properties Williams is marketing in the Downtown area,the eight-year-old Sydney Apartments, is 99% leased and achievingrents of $2.20 per sf.

|

"Seattle is one of the only markets in the country that has hada net loss in apartment units over the past four or five years,"Williams says. "We've had a net loss of about 8,700 units, and evenif you back out those assets that converted to condos in 2007 andmay be converting back, you still have 7,000 units of negativesupply."

|

Combine that with a very empty development pipeline—only 1,500units will be delivered in the tri-county area in 2008, he says,with 2009 not shaping up to be much better--and Williams expectsthe market will continue to see high occupancy rates and risingrental rates for the near future at least.

|

"We didn't even start our recovery until 2005," Williams says."So if we get even a little bit of job growth, we'll be fine."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.