Several residential developers remain hopeful of winning a city competition to construct apartments on the Hayward Place complex adjacent to Boston’s Downtown Crossing district.
Minus a few notable exceptions, it appears that Greater Boston’s multifamily market is continuing to sail along. Two more apartment complexes have changed hands, while several developers are preparing to move forward on new projects in and around the Hub.
“There’s a lot of investment demand still out there,” said CB Richard Ellis/Whittier Partners principal Simon Butler, whose firm just brokered the sale of Mill Village in Randolph and Wood’s Edge in Attleboro. “We’re seeing a lot of interest.”
Butler and others agree that the region’s apartment sector has suffered with the rest of the economy, bringing vacancy rates for such properties to nearly 5 percent after being essentially at 0 percent in the late 1990s and 2000. But “most other cities would be doing back flips for those numbers,” said Butler, noting that Atlanta’s overall apartment vacancy is nearly 10 percent.
The buyer of Mill Village concurs. SSR Realty Advisors paid $31.8 million for the 311-unit Randolph complex, one that will require another $3.5 million influx to modernize the apartments. SSR Senior Portfolio Manager Jeff Morris said his company is bullish on the long-term prospects for Greater Boston. “We like Boston a lot because there is very little opportunity for oversupply,” Morris said from his San Francisco office last week, adding that SSR is especially confident in the region south of Boston.
The Mill Village acquisition is the second in the Bay State for SSR’s $180 million Apartment Value Fund II, following its recent purchase of Yorkshire Court in Shrewsbury. That 180-unit development is already undergoing a $3.5 million renovation, said Morris, whose firm has already invested $80 million of its fund.
Yorkshire Court offers another opportunity for SSR in that it came with 12 acres of developable land that can yield another 108 rental units. SSR is currently working with Shrewsbury officials to permit the site, Morris said. In Randolph, the plan is to hold Mill Village for three to five years, Morris said. SSR purchased the complex from Equity Residential Trust, which paid $19.2 million for the development in 1998.
In the Wood’s Edge transaction, the Mount Vernon Co. paid $8.3 million to Metropolitan Properties of America. The Attleboro complex features 96 units.
Some industry observers have predicted that multifamily sales would tail off following the recent market downturn, pointing out that the 696-unit Gardencrest complex in Waltham traded for about $7 million less than its original asking price when it traded late last month to Home Properties of America for just over $85 million. Others disagreed, maintaining that Home Properties may have overpaid when one considers the renovation costs of the aging complex.
Butler said the bulk of apartment vacancies have occurred in Class A properties and most investors are pursuing so-called value-added plays at older developments built in the 1960s and 1970s. “It was a very sought-after property,” he said of Mill Village, which fits the value-added model. The facility was pursued by a range of pension funds, private players and real estate investment trusts, Butler said.
‘Standing Pat’
One investment opportunity that has languished recently is the 715-unit apartment project slated for D Street in South Boston. Proposed three years ago by Cathartes Investments and AEW Capital Management, efforts to trade the development rights failed last summer, and thus far, it appears there has been little movement on finding a willing buyer in the current environment.
“New construction in a down market is always tough,” said one multifamily sales specialist, while another said it appears AEW and Cathartes have the project on hold at present. Cathartes official Robert Maloney indicated several months ago that the owners may develop it themselves, but he was unavailable for comment last week, as were officials at AEW. “I think they are going to evaluate their options in the near future, but it seems like they are standing pat right now,” said one broker familiar with the project.
Other Hub developers are being more proactive, however, with Kensington Advisors said to be moving aggressively forward on its proposed 28-story residential building near Boston’s Chinatown, while several residential developers remain hopeful of winning a city competition to construct apartments on the Hayward Place complex adjacent to the city’s Downtown Crossing district. And just last week, Winn Development Corp. won state approval for its Clippership Wharf project in East Boston, one that will yield some 400 residential units upon completion.
As for apartment sales, Butler said he believes there will be continued interest among buyers in the coming months, with the biggest challenge for investors being a lack of facilities for sale. Many owners have opted to refinance given the record-low interest rates enjoyed during the past few years, while others are reluctant to sell because there are limited opportunities for them to reinvest the proceeds.
“If you want to get out of the market right now, it’s a great time to sell,” said Butler. But the question is, ‘Where do you put the money?'”
