Four Valley apartment complexes change hands
Multifamily broker claims more out-of-state buyers are eyeing Spokane marketJanuary 17th, 2019
Multifamily housing in Spokane has become a hot commodity for out-of-state investors, contends Hank Seipp, Spokane Valley-based multifamily broker for Berkshire Hathaway HomeServices.
Seipp recently completed transactions for four apartment complexes with a total value of $46.9 million, which sold to a pair of California-based ownership groups.
The complexes that changed hands are Sunrise Villages, at 15615 E. Fourth; Clocktower Apartments, at 15719 E. Fourth; Sunshine Villages at 217 S. Sullivan Road; and the Village on Broadway, at 12623 E. Broadway, all in Spokane Valley.
Seipp declines to disclose the names of the buyers, but information listed on the Washington state Department of Revenue website shows the properties were purchased by Irvine, Calif.-based American Capital Realty Group and San Francisco-based DGE Investments LLC under holding companies.
The complexes, totaling 427 living units and over 300,000 square feet, previously were owned by Scottsdale, Ariz.-based Wolff Co., a real estate private equity firm with roots here. Wolff Co. is a partner of Katerra Inc., which is building a mass timber products factory in Spokane Valley, and is planning new apartment developments in the Spokane area.
As previously reported in the Journal, Katerra has obtained permits to build a 408-unit apartment complex and a 344,000-square-foot commercial development next to the multifamily complex.
“Spokane is an emerging market. It’s growing phenomenally … (it’s) not a sleepy little city anymore,” says Seipp. “We’ve seen an increase, upward pressure, from other markets that are showing much lower cap rates than Spokane.”
Capitalization rate is a measure of potential return on investment or annual profitability of a real estate investment.
Realtor.com, a Santa Clara, Calif.-based online research and real estate seller, ranks Spokane as 21st out of 300 metros nationwide on its list of Hottest Real Estate Markets for December 2018, with a “Hotness Index” rating of 86.79 out of a potential score of 100.
An analysis by Realtor.com shows median days on the Spokane market is 66 days, with inventory moving 6 percent faster than in 2017.
Spokane County also was ranked first out of all counties in Washington, with a Hotness Index of 94.64, out of 100, for the third quarter of 2018. The state’s most populous counties—King, Pierce, and Snohomish—had ratings in the mid to low 50s.
“Sellers like to rotate their properties. They don’t want to buy a property and keep it for 50 years,” says Ken Lewis, designated broker and owner of Berkshire Hathaway HomeServices in Spokane. “They’ll buy it, make their improvements, and it’ll season itself, and then they’ll move that property and buy a new one. Or build another one.”
Berkshire Hathaway HomeServices currently is involved in pending sales of over $100 million in assets, and Seipp says he has sold over $102 million worth of real estate during the past three years, including the $9 million Pheasant Ridge Apartments transaction and the $18.5 million Bentley Apartments transaction.
Seipp says Wolff had placed some of the recently-sold complexes on the market in 2008, at a listing price between $70,000 and $72,000 a unit, but the company pulled them off the market when the properties didn’t sell quickly.
In today’s market, the properties sold for around $100,000 a unit, says Seipp.
“I’ve been keeping my finger on the throttle doing the research, who has financing that would be prime to be assumed,” Seipp says, which is how he says he was able to perform such arms-length transactions.
Arms-length transactions are deals in which property buyers and sellers act independently and have no relationship to one another.