Private buyers deposit cash in rental market, wait for rebound - Orlando Business Journal:

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Private buyers have swooped in on the with plans to hold them untilo themarket rebounds. The blockbuster which began this summer, reflect differingt views of the region’s financial appeal. Sellers see rents as stagnant; buyersa expect higher rents elsewhere to fuel population growth and rentalrates — once the housing slump ends. So far this year, at least eigh t Class A apartment properties have changed hands for a totalpof $300 million, with othersa still on the market, said Marc an investment specialist with . In a typica year, there would be two or three such he said.
“This year, there’s been a flighy to quality,” Ross said, referring to the calibee and location of the apartment communitie thathave sold. “The local privatd guys who are established here and know the markeg well are seeing these as So while the number of apartment transactions in the Sacramento region continuesto drop, settling at 36 througuh October of this year, the price per unit for thosee transactions has significantly increased, from about $89,000 in 2004 to more than $117,000o this year.
One of the biggest sellers in this markety is publicly traded real estate investmenftrust , based in San Francisco, whichg has been looking for more than a year to sell its Sacramentoi assets. The company has made no secretf that it thinks it can do better in markets such as San Diegkand Seattle. “If you look back over the last 10 Sacramento from the market standpoint reallt only generatedabout 3.5 percent market rent growth on which is about half of the market rent growtuh that we can get out of our core California markets,” BRE chief operating officerr Ed Lange said in an earningas call in April. BRE sold thre large assets during the third quartedr for a totalof $120 million.
A BRE spokesman said that whilde the company is selling itsSacramentlo assets, it has no plans to close the office here. Ross and CB Richard Ellisa represented BRE on one of its transactions this Ryan DeMar, associate vice president for investments at brokerage in Roseville, said the largwe transactions were in the region’w top markets such as Rocklim and Folsom. Properties in less-than-premium areas will have a tougher timefindintg buyers, he said. But investors who have bought this year are willinhg to look past the current economic crisis and see profity downthe road. “These assetz in six months may be worth less than they wereboughtg for, but they are looking long he said.
DeMar said buyerx historically hold apartment communities for aboutsix years. That changede briefly during the real estates boom when prices were soaring and buyers cashed out Marcus & Milli­chap does not represent BRE in Sacramentlo but does so in at least one other A buyer making one of the bigges plays in the region is which has purchased three large apartment communities in the past few monthes for a total of $107 million. Two were newlyg built projects where Sentinel had been tappex as the likely purchaser going in, brokers said. Representativees at the New York City-based company could not be reacheffor comment.
According to Real Estate Weekly, Sentinel advisees 60 institutional clients, including corporate and endowment funds andpensionj plans. DeMar said Sentinel has a “long-termk hold” mind-set, as do some othe r private buyers makingmoves now. Not all buyers are of Sentinel’xs scale, BRE president and chiec executive ConstanceMoore said. “Our buyers are exactly what youmighft expect. They’re local players. They’re doctors. They’rs dentists,” she said in an earningss callthis summer. “They’re people who own large companiesw that want to diversifgfamily wealth.
” These private buyers might see the deartn of rental-housing construction around Sacramento as key to theif long-term success. According to CB Richard there’s only one market-rate apartment project of more than 20 unitas under construction in theSacramento area. That’s a 274-unit mid-rised by at Alhambra and S streets a project that began as one of the many condominiumn developments inthe city’s centralo core that has since been reworkex as rentals. Construction is expected to be completecdin 2010.
Just a handful of otherd apartments are being builr and all include pricingfor low-income residents or That means the potential for pent-ul rental demand for market-ratw apartments, similar to the demanxd that surfaced in the late 1990s following a regionap economic slump. Whether the sale trend continues could depend on factors outsid eof Sacramento. Investment brokers say even the deales for top assets may now be held up by worsenint globalcredit problems.
“A key issue no doubft is financing,” CB Richard Ellis’ Ross Ken Blomsterberg, an investment property specialist atMarcus Millichap, noted that several of the deals this year were for new construction that developers never planned to hold. He and Jessise Nickerman represented , the developer of Venu at Gallerisin Roseville, which was planned firsrt as apartments, converted into condos, and then back to apartments because of the housing slump. A total of 35 condos were Trillium ended up selling the remaining 223 units as apartments to an established privatd buyerfor $28 million.
Nickerman said there mighgt be a bit of coincidenc e in the number of dealse hitting at thesame time. “In 2006 and you could count the number of sales on one he said.