CoStar: Apartment Sale at $137 Million Shows Investors’ Rediscovered Love of Las Vegas
Renovated, Older Properties Tempt Buyers With Chance for Rent Increases
A pair of investors who jumped into the Las Vegas rental market three years ago are cashing out.
Continental Realty Advisors and the Roxborough Group just sold a three-property, 1,194-unit portfolio of rentals for $137.5 million, or $115,000 for each unit. The team had scooped up the properties in late 2016 for $87.3 million and have since pumped in millions of dollars of upgrades.
The price, and the quick turnaround by the Roxborough team, reflect the rebound of the Las Vegas rental market, which was hammered worse than almost any other during the recession, and recovered the most slowly.
Fairfield Residential, the San Diego-based apartment giant now controlled by majority owner California State Teachers Retirement System, bought the three properties, all 1990s vintage Class B assets. And while the Roxborough partnership made about $5 million of improvements, most of the unit interiors could still use renovations, leaving upside for Fairfield, who could spruce them up and bump rents as a way to boost returns.
CBRE’s apartment team led by Spencer Ballif brokered the deal.
The three properties are the 440-unit Stonegate Apartments, at 5075 Spyglass Hill Drive in Las Vegas, built in 1991; the 402-unit Loma Vista Apartments, at 1200 West Cheyenne Ave. in North Las Vegas, constructed in 1998; and the 352-unit Viridian Palms, formerly Stonegate West, at 2675 South Nellis Blvd. in Las Vegas, constructed in 1990.
Overbuilding hurt the Las Vegas apartment market during the 2008 economic crash. It took years for those empty units and the thousands of foreclosed single-family homes and condos that became rentals, to be absorbed. While the rest of the nation saw apartment values and rents take off, Las Vegas emerged last from the doldrums.
But emerge it has. The average annual rent growth is now above 7%, according to CoStar data, more than double the national average of 3%. And vacancy is 5.7%, the mirror of the national rate, despite a renewed building boom. Thousands of new high-end units have hit the market in the past few years.
Continental, of Littleton, Colorado, and Roxborough of San Francisco have been busy buying older properties polishing them up to attract value-minded renters priced out of the new rentals and still raise rents.
Just last week, Chicago investment shop Waterton shelled out $140 million, or $186,000 per unit, for a two-property, 750-unit portfolio in Las Vegas. Those properties, too, were 1990s vintage assets that had been renovated.