Apartment complexes draw multiple offers

Sales of multi-family properties in the greater Reno-Sparks area continue to heat up after several lukewarm years.

Premier apartment properties taken to market are drawing multiple offers from buyers from throughout the country, and traditional deals are finally getting done after years of purchases out of foreclosure.

Several large bank-owned properties in the Truckee Meadows eventually will be put up for sale, but more standard market deals are expected in coming months as interest rates hover around 4 percent, says Ken Blomsterberg, first vice president of investments and director of Marcus and Millichap's national multi-family housing group.

The most significant deal this year was last month's $35 million sale of the 308-unit View apartments by Fore Properties to a central California investor. Blomsterberg, who represented the seller in the deal along with Stan Jones and Phil and Sal Saglimbemi of Marcus and Millichap, says Fore's strategy when it constructed the complex in 2009 was to divest the property in three to five years.

Other large transactions in the Reno-Sparks market include last February's sale of the Manzanita Gate property in northwest Reno for $27 million to a San Diego-based buyer, and the July sale of the 206-unit Delucchi Lane Apartments for $8.3 million. Manzanita Gate drew 12 buyers, while the Delucchi Lane property drew 13. Both those properties were bank-owned real estate; the View sale is significant because it is a portent to standard buyer-seller deals.

"We are seeing a lot of market deals," Blomsterberg says. "With interest rates the way they are, it is having a major impetus as far as generating activity and getting some nice cash flows. We are seeing a lot of investors coming in to this market to see better yields."

Aiman Noursoultonova, senior vice president with CBRE's investment properties group in Reno, says the Truckee Meadows has become a target market for investors. The sale of the View represents a per-door price of $113,636.

The last closest sale was the Waterstone in 2011. Bank of the West sold the property for $108,000 per unit.

Those prices are far below what investors are paying in major markets such as New York, Miami, Chicago, Southern California, San Francisco or Seattle. Prospective buyers in those markets often are priced out of purchases and are casting their eyes inland to markets such as Reno for less-competitive purchases, Noursoultanova says.

"This year has been a good indicator that the market is turning. A lot of coastal properties are becoming really expensive, so investors are looking for situations where it is a lot less competitive. For good quality assets, we are seeing multiple offers."

Adds Blomsterberg: "They would rather be in core markets, but the pricing in those properties is off the charts. In core markets the price-per-unit is very aggressive and very much is in the seller's favor."

The selling price per square foot today often falls to levels prior to the real estate runup, Blomsterberg says. For the most part, multi-family rents in Reno-Sparks have stabilized and even are growing slightly in some cases. And there's really nothing in the pipeline as far as new construction.

Reno, he says, appears to have finally turned the corner as far as apartment sales go.

"Most properties are getting multiple offers, and many deals that we are taking to market are not distressed," Blomsterberg says.

Floyd Rowley, senior vice president of investments with Johnson Group Commercial Real Estate, says real estate listing services such as Loopnet are packed with a host of smaller apartment properties, a signal that sellers also are getting back into market. Many prospective sellers shied away from putting their properties up for sale over the past few years as property values plummeted due to sagging rents and increased vacancies.

Those sellers will be greeted by a host of hungry buyers eager for new investment opportunities.

"Buyers are moving into secondary and tertiary markets because pricing in primary markets is out of control," Rowley says. "People who are looking for yield are looking for markets like Reno. Our unemployment rate is gradually dropping, and there seems to be a burst of optimism that as an overall market we are turning the corner. A number of sellers are waking up to that fact."