Detroit Investors Buy Suburban Vegas Apartments

July 1, 2008 - LAS VEGAS-In one of the few multifamily sales in the Las Vegas region in June, a group of metropolitan Detroit real estate investors has acquired two apartment projects comprising 106 units in the southeastern corner of the Las Vegas Valley for $7.8 million. The two class B apartment buildings are located in Boulder City, a non-gaming community of 15,000 located 20 minutes southeast of Las Vegas, between Henderson, NV and Lake Mead.

Built in the late 1970s and early 1980s, the two complexes are located a few blocks of each other. Casa De Alicia is a 50-unit complex with 39,009 rentable sf on 2.74 acres. The other, M&M II, is a 56-unit complex with 35,024 rentable sf on 3.1 acres. The properties offer one-, two- and three-bedroom units ranging in size from 617 sf to 994 sf. Rent and occupancy was not immediately available.

As the only Nevada city with no gaming, Boulder City is a stable community popular with families. Mitchell Mondry of the Birmingham, MI-based M Group Inc., a principal in the acquiring investment group, says the lack of gambling and restrictions on new apartment development “made the properties an attractive investment.”

The buying entity, M&M Boulder City Apartments LLC, includes the principals of Broder & Sachse Real Estate Services Inc., a commercial, residential and industrial property management and development company based in Birmingham, MI, and members of M Group Inc., a real estate acquisition and development company also based in Birmingham. Richard Broder says the acquisition is part of a larger effort by the two firms to better diversify their holdings geographically.

Only two apartment complexes sold in June in the Las Vegas Valley, according to Real Capital Analytics. The other, which GlobeSt.com reported on earlier this week, was the 304-unit Pyramid Apartments in North Las Vegas. Heritage Associates of San Francisco acquired the property from National Commercial Ventures of Los Angeles for $30.25 million or $99,507 per unit.

Only six apartment developments larger than 100 units changed hands in the first three months of the year and only three changed hands in the second quarter, according to Real Capital Analytics. That brings the total number of plus-100-unit apartment sales through the first half of 2008 to nine. In 2007, 12 plus-100-unit properties changed hands in the first three months of the year, according to research by local apartment broker Michael Belnick.

A recent report by apartment specialist H&P says part of the reason for the slowdown is that lenders are underwriting off of actuals and not pro forma, and are requiring larger down payments. Fears related to the problems in the single-family market and falling NOI have resulted in a significant bid-ask gap. Despite that, prices and cap rates for Las Vegas assets have seen little change in recent months, hovering between 5.5% and the mid-6.0% range, according to H&P.

A first quarter report on the apartment market by Applied Analysis, a local business research and advisory firm, found that while sales have slowed occupancy was up slightly during the first quarter along with rental rates. The locally based business research and advisory firm reported that after six consecutive quarterly decreases, average occupancy increased to 92.7% from 92.3% at the start of the year. In the first quarter of 2007, average occupancy was 94.1%. In addition, it said the average asking rent rose 1.8% over the last 12 months—albeit the slowest growth rate since the beginning of 2004—and now stands at $888 per unit per month.

Those kinds of positive occupancy numbers in an otherwise dreary economy—and the fact that tens of thousands of new temporary and permanent jobs are being created by the $30 billion of resort development currently under way on the Las Vegas Strip—has developers preparing for new apartment projects despite the lack of a for-sale market. Most of the work is occurring around the Interstate 215 beltway, however, and most of it won’t be coming to market until 2010 or later.