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Originally published January 21, 2015 at 6:52 PM | Page modified January 23, 2015 at 10:56 AM

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Money pours into buying local apartments

Apartments were the hottest commercial properties in the Greater Seattle area last year, with buyers collectively spending more on such assets than on the higher-profile office buildings, according to newly released data.


Seattle Times business reporter

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Oooh boy I can hardly wait to have Wall St as my landlord. I'm sure they'll look after the property and really care... MORE
With this goes higher rents and more people kicked to the streets. The reason they are so hot is there are no controls... MORE
Look no further for a perfect example of how and why income equality occurs. There are no bootstraps, only leverage. MORE

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Apartments were the hottest commercial properties in the Greater Seattle area last year, with buyers collectively spending more on such assets than on the higher-profile office buildings, according to newly released data.

Investors snapped up 149 apartment properties for a total $3.8 billion and 71 offices for a total $2 billion, according to Real Capital Analytics, a New York-based commercial real-estate-data company, which tracks deals worth at least $5 million.

The statistics bear out how intense the investor interest in local apartments has become:

Last year’s apartment sales were the highest ever. The same isn’t true for office sales, which peaked in 2007 at nearly $10.3 billion, five times their 2014 level.

Apartment sales have edged out office sales locally only twice in the previous 10 years, in 2005 and 2008.

Nationally investors spent more on office projects, paying $118.6 billion compared with $112 billion for apartments. But sales of apartments nationwide, like those in the Seattle market, set a new record.

The priciest deal last year in the Seattle market was the sale in April of Joseph Arnold Lofts in Belltown.

Atlanta-based investment manager Invesco paid Seattle-based The Schuster Group nearly $700 a square foot for the 132-unit building, said Seth Heikkila, senior vice president at commercial real-estate brokerage JLL, which wasn’t involved in the transaction.

Invesco also was behind the other record-breaking deal of 2014, on a per-unit basis: It bought The Martin in downtown Seattle from Seattle developer Vulcan for just under $600,000 per unit.

“You’ve got a lot of institutional investors who are looking at what’s going to happen to housing in the future,” Heikkila said. “It seems to be a safe bet” the number of renters is going to be higher, he said.

Another factor driving the boom in sales is that some apartment owners have commercial loans that are coming due soon, said Jon Hallgrimson, executive vice president at CBRE in Seattle. They have to decide whether to refinance their loans or sell the property.

“So a lot of profit-taking is going on,” Hallgrimson said.

Real Capital Analytics’ data for the Seattle market include King, Snohomish, Pierce, Kitsap, Island and Thurston counties.

The Seattle region’s rising rents, stoked by strong job growth and low apartment-vacancy rates, have made apartments attractive to pension funds, real estate investment trusts and other investors.

Some apartment buyers have also said that given the price they paid for buildings, they need to raise the rents.

Investors have swarmed the Seattle area and bid up prices. Developers of new apartments and longtime owners of older apartment buildings have found it a good time to sell, but renters in those buildings often face much higher rents or even displacement due to massive renovations.

The most active buyer of Seattle-area apartments last year was Palo Alto, Calif.-based Essex Property Trust, which spent $729.9 million on 17 properties, according to Real Capital Analytics. Last April, the company also acquired another Bay Area competitor, BRE Properties in San Francisco, which held properties in the Seattle area.

Essex already was the largest apartment owner in King County in fall 2012, with more than 7,160 apartments, according to an analysis by Dupre+Scott Apartment Advisors. About 3,000were in Bellevue and Redmond, and 1,500 in Seattle.

Kennedy Wilson, an equity fund based in Beverly Hills, Calif., and New York-based Guardian Life Insurance Co. rounded out the top three buyers in the Seattle market.

One of the most active sellers last year was Seattle-based Goodman Real Estate, which sold six properties for $203.2 million, Real Capital Analytics reports.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com



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