The buying fever that is heating up residential resales is spreading to the local apartment market.
Private investment firm Griffis Residential of Denver bought Quest Apartments in Henderson this month for more than $41 million, or $132,500 per unit. It is the highest per-unit purchase price since 2008 for a traditional apartment complex, and observers say it certifies that Las Vegas is back on the map for multifamily investors.
“We have seen a number of transactions that suggest buyers are willing to pay more for quality assets here, and this latest transaction is a sign of that continued interest,” said Brian Gordon, a principal in Applied Analysis, a local research firm that publishes a quarterly apartment-market update.
Said Christopher Bentley, a principal in the Las Vegas office of ARA Real Estate Investment Services and the broker who arranged the Quest deal: “People are still somewhat nervous about Las Vegas, but investor interest is very high. Returns are much higher here than in other cities, because our prices became so distressed.”
It is the first foray outside Colorado for Griffis. Company representatives said the Las Vegas Valley fits into their expansion strategy; they didn’t respond by press time to a phone call for comment on why.
The company boosted its Class A apartment portfolio by roughly 10 percent with its purchase of Quest, a 310-unit luxury complex, built in 2009 by Fore Property Co., on American Pacific Drive near Stephanie Street. Griffis isn’t done buying: It said it plans to spend $150 million on apartment neighborhoods this year, after dropping $105 million in 2012. Its statement didn’t say whether it would buy additional local properties.
In this latest chapter, Southern Nevada’s apartment story seems to be following the same narrative as the for-sale market, with one major plot twist. Banks were far slower to foreclose on multifamily complexes, mostly because they couldn’t afford to take a $20 million write-off on a single neighborhood, Bentley said.
Still, the foreclosures that did happen dragged down overall prices.
The average local price per unit was $107,000 in 2007. In that climate, Quest would have sold for as much as $170,000 per door, Bentley said, though he acknowledged that 2007’s prices were too high to be justified.
But prices of the past 12 months are too low to be justified, at an average of $65,000 per unit, Bentley said. He traced the steep falloff to the older, financially distressed properties that dominated apartment sales in the past year, as investors looked for bargains.
And bargains they have found. Low interest rates have paired with asking prices below market fundamentals — and below prices in other big markets — to make multifamily buys more affordable than they’ve been in years, he said.
Bentley said he thinks the market is just beginning its recovery cycle, and with a typical cycle lasting as long as five years, average sales prices have room to grow. While real estate appreciation rates are high — more than 30 percent year over year in single-family resales, for example — prices are still significantly below what they should be, hovering around 2001 levels, he said.
Gordon agreed that the apartment market should continue to improve. His firm’s first-quarter data show that occupancies have jumped to nearly 94 percent, up from a recession-era low of roughly 90 percent in the fourth quarter of 2009, and closing in on a 2008 high.
Yet even as tenants move back in, monthly rents have stayed at around $750 to $775 since late 2009, down from nearly $900 in 2008.
Contact reporter Jennifer Robison at jrobison@ reviewjournal.com or 702-380-4512. Follow @J_Robison1 on Twitter.