Value-add Multifamily Investors Rush to Phoenix

Value-add multifamily investment is picking up in the Phoenix market. Phoenix has seen a rise in rent growth and increasing demand for apartment units. These fundamentals paired with a dated apartment stock has meant big opportunities for investors. This year, there have been several notable transactions from value-add players, with deals like TruAmerica Multifamily’s purchase of a 424-unit apartment complex in Tempe earlier this year to DRA’s recent sale of a six-property, 1,751-unit apartment portfolio, which it brought to market after completing a value-add plan. A global investor purchased the portfolio.

“Phoenix is demonstrating long-term sustainable job growth,” John Cunningham, managing director at JLL Capital Markets, tells GlobeSt.com. “In addition the growth is more diversified than previous cycles, which is attracting all types of investors . With a growing population and very balanced pipeline of new construction, many investors are seeking to gain a foothold in high barrier-to-entry submarkets through a value-add strategy.” Cunningham represented DRA in the recent sale, along with his JLL colleague Charles Steele.

Institutional investors, in particular, are taking note of the fundamentals in the market and the opportunities. This year, there has been an increase in institutional capital chasing deals. “We saw how attractive Phoenix is to institutional investors again earlier this year with the Optima Sonoran Village transaction,” adds Cunningham. “Also contributing to this demand is a lack of single family new construction and millennials’ desire to rent versus own. Currently Phoenix offers one of the best values in the Southwest for rent-to-median-income ratio , which gives investors the confidence that there is room to grow.”