As institutional investors snap up just-opened Class A apartments in Atlanta’s urban core, more entrepreneurial players are finding opportunities in untraditional markets where yields generally are higher.
Class C apartments, often partially filled with renters armed with Section 8 housing vouchers, don’t get the attention of institutional investors, but smaller-scale investors seeking new opportunities are finding success in that overlooked sector of the housing market.
“Secondary markets appeal to investors seeking a stronger yield as they usually consist of properties outside of the investment criteria of many buyers, helping investors avoid greater competition,” said Jake Reid, a senior director of Franklin Street’s multifamily brokerage team in Atlanta.
Reid and colleague Roger Schoerner recently represented the New Jersey-based seller of Delta Appletree Apts. at 2328 Campbellton Rd. in southwest Atlanta. The pair arranged the sale of the 210-unit complex to Apple Peach Holdings, LLC, an individual New York investor for $8.7 million – a new pricing high for the Campbellton Rd. multifamily micromarket.
Apple Peach paid $41,449 per unit for Delta Appletree, constructed in 1969. The transaction’s cap rate was 6.5%. “The record-setting price of this asset illustrates that buyers are willing to spend a premium to get a physically superior investment at a lower cap rate.”
In addition, Delta Appletree’s location in an area with no new multifamily construction proved attractive to the buyer. Schoerner said. “Delta Appletree represents a great opportunity for investors seeking markets with limited new construction and shrinking amounts of affordable housing,” he said. “High construction costs create an economic barrier to more affordable markets, driving increased investor demand to markets just beginning to witness potential rent growth.”
Reid said he expects demand for work force housing on Atlanta’s southside to continue to increase, especially as major companies open new massive warehouses and distribution centers in the area and need the labor.
For more information on the sale of Delta Appletree apartments, please see CoStar Comp #4053574.