Three Apartment Complexes Sold in Three Weeks

ORLANDO-In a sign that the apartment market is waking from its slumber, recently, three apartment complexes were sold in three weeks by CB Richard Ellis’s Central Florida Multi-Housing Group.

“There has been a drastic improvement from a year ago,” says Sheldon Granade, senior vice president at the Central Florida Multi-Housing Group at CB Richard in Orlando. “Although the market is still depressed overall, we have seen an uptick in buyer interest and closings,” he says. In the first four months of this year, there was approximately $100 million worth of apartment sales in the Orlando market, says Granade.

In 2009, there was $219 million worth of apartment sales in Orlando for the whole year, says Granade. But this year, he expects there to be $350 million to $400 million worth of sales. Between 2005 and 2008, when condo conversions were in vogue, apartment sales in the Orlando market averaged about $1 billion a year, says Granade. In fact, in 2005, they were over $3 billion in deals, “which is abnormal,” he says. “Today, we are getting back to normal for Orlando, which means between $500 million and $700 million in apartment sales per year.”

One of the deals which was done in the Orlando market during the three week blitz mentioned above involved a fractured condominium. Granade represented the bank, which had ended up with 220 out of 325 units, which were left over from a failed condominium conversion. The bank was paid $12 million in the sale.

A second complex was a stabilized apartment property with 140 units, named Cedar Creek, in Sanford, an Orlando suburb. It was built in 1990. A former tax credit property, says Granade, “the restrictions burned off and it became a market-rate deal, which sold for $4.3 million. The buyer was Old Homes, Inc. a private capital investment group based in Richmond, Virginia.

The third deal in Orlando was built in the late 1960s. “It was also a normal rental deal with 300 units” says Granade, who declined to disclose the name of the property or the buyer, which was a private equity firm from outside of Orlando.

Granade says that apartment building prices are lower than they were a few years ago, even when the properties are not officially distressed, because prices are based on lower net operating incomes than before the economic crisis. Furthermore, investors have been accepting lower rates of returns on their properties than they would have a few years ago, because of the economic downturn, he says. But recently, prices have begun to move up again.

To the degree that prices are getting somewhat higher, they are based on the assumption that the worst is over, says Granade. According to Boston-based Torto Wheaton MPF Research, Orlando is expected to add 6000 jobs in 2010 and about 30,000 in 2011.

At the same time, rental income and occupancy have had an uptick, says Granade. “We see an average occupancy rate in the Orlando apartment of close to 91% or even 92%, which is one to 1.5 points higher in the first quarter of 2010 than in fourth quarter 2009.

Rents for the last three years in Orlando have gone down each year. The average rent at the end of 2006 was $862 per month compared to the end of last year, when it was $812, says Granade. Today, rents are stabilized and improving very modestly, he says.