TUCSON, ARIZONA – Multifamily assets remain the preferred investment vehicle of commercial real estate investors. With the upside to multifamily investments soundly outpacing that of other asset types, that doesn’t appear to be changing any time soon.

With no slowdown in sight, Art and Clint Wadlund of Berkadia Real Estate Advisors in Tucson closed on $102.76 million in five multifamily transactions since the start of the new year. The aggregate amount of these transactions is 1,139 units, or $90,220 per unit.

Sales include:

City Heights Apartments at 3700 N 1^st Ave. in Tucson sold for $22 million ($80,882 per unit). The 272-unit complex in the central submarket of Tucson was renovated in Jan 2013 with studios one- and two-bedroom units. Amenities include a business center, clubhouse, pet park, fitness center, spa, and pool.

Rillito Village Apartments, LLC an affiliate of SB Pacific Group of Berkeley, California was the seller. The buyer, Catalina Apartments Tucson, LLC is a group of investors based in Marina Del Rey, California.

Arcadia Gardens Apartments at 7887 East Uhl Street in Tucson sold for $18 million ($90,000 per unit). The 200-unit complex in the eastern submarket of Tucson consists of 14 – two-story buildings and a unit mix of studios, one-, two- and three-bedroom units. Features include: high speed internet access, washer/dryers, air conditioning, heating, ceiling fans, smoke free, cable ready, storage units, wheelchair accessible, dishwasher, disposal, microwave, carpet, tile floors, views, walk-in closets, window coverings, balcony, patio and grills.

Arcadia Gardens Apartments, LLC an affiliate of Water Tower Realty of Chicago was the seller.  The buyer, Arcadia Gardens Tucson, LLC is a group of investors based in Marina Del Rey, California.

Toscana Cove Apartments at 8665 E. Speedway Blvd. in Tucson sold for $17.91 million ($77,198 per unit). The 232-unit complex is in 11 – 3-story buildings in the eastern submarket of Tucson. The unit mix consists of studios, one-, two- and four-bedroom units with on-site laundry, covered parking, heated pool, jacuzzi, recreation room, exercise center, clubhouse, barbecue areas and is pet friendly.

The sellers, Tucson Properties NV, LLC and Prospero Property Ventures, LLC investment groups are based in Beverly Hills, California. The buyers, Chateau Park Investors, LLC and Toscana Investors, LLC investment groups are based in Newport Beach, California.

Yardz on Kolb Apartments at 1345 South Kolb Road in Tucson sold for $36.7 million ($89,512 per unit). Located in the eastern submarket of Tucson, the 410-unit complex with studios, one-, and two bedrooms and townhomes with two- or three- bedroom options. Amenities include on-site maintenance, controlled access/gated, business center, fitness center, playground, laundry facilities, clubhouse, 2 swimming pools, spa/hot tub, billiards, shuffle board, monthly resident events, on major bus lines, pet friendly, dog park, BBQ/picnic area, Spanish speaking staff, and package receiving, all within walking distance to shopping and banking.

The seller is 5^th & Camelback Tucson, LLC and 22^nd & Kolb, LLC based in Scottsdale. The buyer is MIMG Clix Yardz, LLC of Franktown, Colorado

McCormick Luxury Apartment at 201 S Stone Ave. in Tucson sold for $8.15 million ($326,000 per unit). The seller was Stone Avenue Homes LLC, an affiliate of Holualoa Companies, and the buyer was AHC McCormick LLC, an affiliate of Chicago-based AHC Management. Property transferred with an assignment of rents under a Government Property Lease Excise Tax (GPLET) agreement with the City of Tucson.

For additional information Art Wadlund should be reached at 520.299.7200 and Clint Wadlund can be contacted at 520.615.1100.

To learn more, see RED Comp #7528, #7552, #7481, #7484 and #7588.

High Investor Demand and Moderate Economic Growth Expected to Maintain U.S. Real Estate Pricing in 2020 

PHOENIX, Arizona — Strong demand from both domestic and foreign investors, combined with moderate economic growth, is expected to keep capitalization rates for U.S. commercial real estate assets broadly stable in 2020, according to the latest research from global property advisor CBRE.

The CBRE North American Cap Rate Survey found that industrial, multifamily, and suburban office cap rates tightened the most in H2 2019, while hotel and retail cap rates were generally unchanged except for a negligible increase for retail power centers. In metro Phoenix, cap rates declined across the Class A industrial, neighborhood retail, multifamily and some hotel segments, while cap rates for office, retail power centers, Class B and Class C industrial and some hotel segments remained unchanged or increased.

Continued cap rate stability is expected in the first half of 2020 across property types, segments, classes and market tiers, except for a slight increase in the hotel sector.

“U.S. real estate assets remain in high demand from domestic and foreign investors. Cap rates were stable in 2019 and we expect them to remain so in 2020, despite the uncertainty created by the coronavirus and the upcoming presidential election. Continued moderate economic growth will keep interest rates low, and sustain demand for commercial real estate,” said Richard Barkham, Global Chief Economist for CBRE.

Among the major commercial real estate sectors:

• Office: Strong market fundamentals continue to support competitive pricing for office properties. There were minimal changes in office cap rates in H2 2019, continuing a pattern of stability over the past three years and remaining near record-lows for this cycle. Tier II markets, particularly in the suburbs, were one of the few categories with noticeable downward movement in cap rates. No change in office cap rates is expected in H1 2020.
• Cap rates for office properties of all classes in metro Phoenix remained unchanged during H2 2019. Cap rates for stabilized CBD office properties averaged 7.16% while suburban office properties averaged 7.41%. Cap rates for Class AA product in both CBD and suburban sectors were the lowest at 5.75% and 5.88%, respectively.

“Ten years of virtually uninterrupted demand and stable employment growth continue to underpin a favorable and competitive environment for U.S. office properties. Cap rates remain near record lows, supported by cyclically high levels of global and domestic investment capital seeking office assets. Our outlook is for continued cap rate stability for office assets in the first half of 2020,” said Chris Ludeman, Global President of Capital Markets for CBRE

• Industrial: Soaring asset values led to sustained cap rate compression in H2 2019. Cap rates are expected to remain broadly stable in 2020, with some moderate tightening. Cap rates for acquisitions of stabilized assets averaged 6.13% for all tiers and classes, falling by 13 bps (basis points) in H2 2019. Rates for value-add acquisitions fell by 17 bps to 7.18%. Class A cap rates declined 10 bps to 4.89%, the lowest level since CBRE’s Cap Rate Survey began in H1 2009.
• In Phoenix, demand for high-quality industrial assets was strong. Class A industrial cap rates decreased 50 bps to 5.0%. The average rate for acquisitions of all tiers and classes of stabilized assets fell 17 bps to 6.13%.

“The Phoenix Industrial market has seen 40 straight quarters of positive net absorption outpacing completions; driven by the availability and affordability of labor, the reliability and affordability of power, affordability and availability of housing for employees and the ability to service close to 35 million people in a single-day truck haul,” said Dan Calihan of CBRE Industrial & Logistics in Phoenix. “These factors coupled with the benefits of living in a great climate without any natural disasters continue to drive e-commerce, manufacturing, food & beverage uses, third-party logistics operators and data center locates to Metro Phoenix. Continued economic growth will continue to drive interest from investors and industrial users alike. The future is bright for leasing and capital markets activity in the Valley of the Sun.”

• Retail: Cap rates were relatively stable in H2 2019, especially across Tier I and II markets, and Class A and B properties, with few sales of core assets. Tier III markets and Class C assets attracted increased investment activity among private buyers due to higher risk tolerance and opportunities for redevelopment.
• In Phoenix, the average cap rate for stabilized neighborhood retail assets of all classes fell by 21 bps to 7.43%. Cap rates edged down 13 bps to 6.13% for Class A neighborhood centers while cap rates for Class B and Class C neighborhood centers dropped 25 bps each to 7.5% and 8.63%, respectively. Cap rates for stabilized power centers of all classes remained unchanged at 8.42%.

“Grocery-anchored neighborhood centers remain the favorite retail asset class for investors because of perceived resilience in a recession and relatively low e-commerce penetration. Store formats that incorporate technology to attract consumers and create demand are particularly attractive to investors,” said Melina Cordero, leader of CBRE’s retail capital markets business for the Americas.

• Multifamily: Cap rates and expected returns on cost remained at historically low levels in H2 2019. Cap rates edged down 9 bps to 5.11% for infill stabilized assets and by 11 bps to 5.37% for suburban assets. Cap rate spreads between Class A and Class C assets, and between Tier I and Tier III markets continued to tighten, indicating that many investors are finding opportunities in lower-quality assets and in secondary and tertiary markets.
• In Phoenix, multifamily cap rates and expected returns on cost continued to drop during H2 2019. Cap rates for infill stabilized property acquisitions averaged 4.75%, a 17 bps decrease from H1 2019. The average cap rates for Class A and Class B assets fell 13 points each to 4.64% and cap rates for Class C assets decreased 25 bps to 4.75%. Expected returns on cost for infill value-add acquisitions averaged 5.63%.

Cap rates for suburban stabilized assets averaged 4.58%, a decline of 21 bps. Stabilized suburban Class A cap rates fell 25 bps to 4.50%, Class B cap rates fell 13 bps to 4.5% and Class C cap rates declined 25 bps to 4.75%. Expected returns on cost for suburban value-add acquisitions averaged 5.63%.

“Phoenix multifamily cap rate compression is a byproduct of the region’s healthy market fundamentals and strong economic drivers, particularly surging population and job growth,” said Matt Pesch of CBRE Multifamily in Phoenix. “Solid multifamily metrics, including low vacancy and nation-leading rent growth driven by historically high demand make Phoenix a top target market for multifamily investors.”

• Hotels: Cap rates were essentially unchanged in H2 2019, down by just1 bp to 8.27%. Cap rates for both CBD and suburban properties were stable.A long-term trend of shrinking cap-rate spreads between market tiers continuedin 2019. Spreads between CBD and suburban full- and select-service hotelsremained slightly elevated compared with 2018.
• In Phoenix, cap rates for CBD hotel properties averaged 7.56% and cap rates for suburban hotel properties averaged 7.91%. Cap rates for luxury CBD hotel assets and luxury suburban product edged down 50 bps each to 6.45% and 13 bps to 6.63%, respectively. Cap rates for full-service and economy CBD hotel properties declined 13 bps to 7.63% and 8.88%, respectively, while cap rates for full-service and economy suburban hotel properties increased 13 bps each to 7.88% and 9.38%, respectively.

Phoenix Snapshot here: CBRE North America Cap Rate Survey PHOENIX SNAPSHOT

TUCSON, Ariz. – Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, has announced the sale of Tucson East Apartments, a 52-unit apartment property located in Tucson, AZ, according to Ryan Sarbinoff, regional manager of the firm’s Tucson and Phoenix offices. The asset sold for $3,49 million ($67,115 per unit).

Hamid Panahi and James Crawley, investment specialists in Marcus & Millichap’s Tucson office as well as Michael Hubl in the firm’s Phoenix office had the exclusive listing to market the property on behalf of the seller, a limited liability company. “The sellers of Tucson East enjoyed an over decade-long ownership and meticulously maintained the community,” Panahi explained. “Capitalizing on submarket fundamentals and operational momentum, the ownership pool decided it was time to replace their equity in their own separate investments.”

The buyer, a limited liability company, was also procured by Panahi, Crawley and Hubl. “The buyer, one of the most active in the private capital space in Tucson, was attracted to the community due to the age-restricted nature of the operations, first generation value-add opportunity with interior enhancements, and the additional scale of management in the submarket,” Crawley stated. “Utilizing Marcus & Millichap’s financing division, the buyer was able to capitalize on today’s attractive rates and terms with long-term debt,” he added.

Tucson East Apartments is located at 8490 East Old Spanish Trail in East Tucson. Developed in 1982, the property offers 41 one-bedroom/one-bathroom units and 11 two-bedroom/two-bathroom units. Unit interiors feature fully equipped kitchens with dishwashers and disposals, an intercom system linked to the community front gate, and private patios or balconies. The well-maintained community offers residents a heated swimming pool and spa, resident club house, and on-site leasing office and laundry center. Additional community amenities include photovoltaic solar panels, solarized resident hot water, and reserved covered parking for select units.

To learn more, see RED Comp #7591.