As the commercial real estate market navigates through the uncertainties of 2023, the 'largest apartment deals 2023' stand out, showcasing significant transactions despite economic shifts. This article delves into the most noteworthy apartment sales, offering an in-depth analysis of trends and their implications for the market.
Following record-setting sales in 2021 and 2022, investments in U.S. apartments plummeted in 2023 amid the rising cost of debt and economic uncertainty. However, the asset class remains an attractive commercial real estate investment compared to other asset types. And six apartment communities changed hands for over $200 million during the year.
More than 5,400 apartment properties changed hands at a value of $119 billion during 2023, according to data from MSCI Real Capital Analytics. The overall sales volume in 2023 was down 61% year-over-year. This was also well below the record-setting sales that averaged $332 billion per year in 2021 and 2022, when a total of about 25,000 properties changed hands as the result of pent-up demand following the onset of the pandemic.
Recent activity was also well below the $169 billion annual average logged during the five years leading up to the pandemic (2015-2019). The average price per unit was also down, registering at $204,216 in 2023, off 13% year-over-year. While that was the lowest level since 2020, it was well above the per unit pricing from 2015 to 2019 which averaged $151,000. Meanwhile, cap rates for apartment transactions in 2023 were up 60 basis points (bps) year-over-year, averaging 5.3%. That was the highest cap rate in four years. Still, apartment cap rates during 2023 remained the lowest among major property types.
Following are the largest single-asset market-rate apartment transactions during 2023, all selling for over $200 million and representing every region of the country.
Solow Tower Apartments
The largest single-asset apartment transaction during 2023 was the sale of Solow Tower Apartments in New York. In April, Manhattan-based real estate investor Black Spruce Management acquired a 45-story residential tower in Manhattan’s Upper East Side. Black Spruce purchased the high-rise from New York-based Solow Realty, a division of Soloviev Group, for approximately $403 million. The 322-unit building at 265 E. 66th St. was built in 1979 and renovated in 2015. The purchase price came to roughly $1.25 million per unit. Amenities include a doorman, concierge, fitness center, pool and sundeck.
Southgate Towers
In January, Denver-based Apartment Income REIT Corp. (AIR Communities) purchased the 495-unit Southgate Towers apartment community in Miami from Virginia-based Gumenick Properties. The development traded for approximately $241 million, ranking as the second-largest single-asset apartment transaction during 2023. The sale price came to around $487,900 per unit. The property sits on four acres on West Avenue overlooking Biscayne Bay in Miami Beach, within the Downtown Miami/South Beach submarket. The pair of 14-story buildings were built in 1958 and Gumenick completed a $40 million renovation in 2016. The community features a fitness center, yoga studio, lap pool, resort-style pool, EV charging stations, pool-side cabanas, grilling stations, community lounge and community pier.
The Elm
The third-largest apartment transaction to take place in the nation during 2023 was the sale of an asset in the Washington, DC market. At the end of August, Washington, DC-based Carr Properties sold The Elm on Wisconsin Avenue in Bethesda. Denver-based Apartment Income REIT Corp. (AIR Communities) bought the two-tower community with 456 units for $220 million or roughly $515,600 per unit. Carr completed construction on the transit-oriented development in 2001. The 28-story apartment towers are connected on the 28th floor which features a rooftop pool and fitness center, and on the 17th floor, there is a landscaped terrace.
Camden Martinique (The Grand Costa Mesa)
In late December, Irvine, CA-based Advanced Real Estate purchased the Camden Martinique apartment community in Anaheim. Houston-based Camden Property Trust sold the development for $232 million, the nation’s fourth-largest apartment transaction last year. The 714-unit community traded for roughly $325,000 per unit. The four-story development off Pinecreek Drive in Costa Mesa was built in 1986. Advanced Real Estate plans to invest $45 million to remodel the complex which will include adding resort-style pools and spas, an extensive dog park and barbecue areas. The renovation is expected to take four years to complete. The community has been rebranded The Grand Costa Mesa.
727 West Madison (One South Halsted)
In August, a joint venture between California-based Ares Management and locally based F&F Realty sold a 45-story apartment tower in Chicago to Pontegadea, a Spain-based real estate company. The 492-unit apartment tower traded for nearly $232 million, ranking as the fifth-largest transaction in the nation during 2023. The sales price equated to roughly $471,000 per unit. The oval-shaped multifamily tower at 727 W. Madison St. (formerly known as One South Halsted) in The Loop was built in 2019 and is Chicago’s tallest building west of the Kennedy Expressway. Amenities at 727 West Madison include a resort-style pool and spa, pool-side cabanas, grilling stations, fitness center, yoga studio, resident lounge with demonstration kitchen, club room with billiards, 24-hour concierge, theater room, coworking space, dog spa, dog park and bicycle storage.
Palisade at Westfield UTC
Property Reserve Inc. of Salt Lake City acquired the 300-unit Palisade apartment community in early December. The 23-story building on Lombard Place in San Diego’s La Jolla/University City submarket was built in 2019 and contains 300 units. New York-based JP Morgan Chase sold the development for $203 million, the sixth-largest transaction in the nation during 2023. The purchase price came to nearly $677,000 per unit. Amenities include a 4,300-square-foot indoor/outdoor rooftop sky lounge, a resort-style pool, fitness center, resident lounge, yoga and spin studios, co-working café, outdoor kitchen, karaoke room, private event space, bike storage, pet run and steam rooms.
Source: Largest Apartment Transactions in 2023
https://www.creconsult.net/market-trends/largest-apartment-transactions-2023/
