Older Properties Trading Better Than New Product

ATLANTA-Investment sales are down by $30 million compared to the previous year, but older properties trading in the under-$10 million range are moving quickly, according to a new study by locally based Bullock Mannelly Partners Inc.”Nearly 40% of all transactions during 2003 occurred during the fourth quarter, indicating positive momentum by investors,” says Bullock Mannelly research director Eric Pawloski. Properties 20 years old or more are getting more attention than newer product, the researcher says.Sales in 2003 totaled 106 valued at $980 million. In 2002, the count was 141 transactions valued at $1.01 billion.The largest multifamily deal in 2003 was a combined $89-million sale of two developments purchased by locally based Lane Co. from New York-based Goldman-Sachs and Korman Communities. The first complex, Mount Vernon Place Apartments, built in 1996 and consisting of 412 units, was purchased for $45.2 million ,or $109,721 per unit. The property sits on 24 acres on Mount Vernon Highway near the northern-most DeKalb-Fulton County border.The second property, Dunwoody Place, is on Peachtree Dunwoody Road in Fulton County, north of Abernathy Road. The 396-unit complex, built in 1998, was sold for $43.8 million, or $110,593 per unit.On the capital markets scene, Pawloski says short-term rates remain near all-time historical lows. “After falling from almost 7% at the beginning of 2001 to the current level of 1.13%, it appears Libor has finally stabilized.”Long-term rates “continue to be very attractive,” the researcher says. Ten-year Treasury rates “have not experienced the same dramatic decrease as short-term rates, but the 10-year Treasury rate is near historical lows. After briefly drifting to record lows near 3.75%, recent encouraging job growth numbers have increased rates to around 4.15%,” Pawloski says.”With an abundant amount of equity available for investment and historically low interest rates, investors are driving cap rates extremely low,” Pawloski notes. Additionally, with a weaker dollar, foreign investors are seeking US real estate as a strong investment.”Cap rates continue to fall as commercial real estate continues to offer better returns compared to other investment alternatives,” the researcher concludes.