AvalonBay Sells 421 Units for $34M

RENTON, WA-The San Diego-based apartment REIT AvalonBay Communities has sold its 421-unit Greenbriar property here for $34.1 million, or $2.2 million less than it invested in the property. The new owner is San Diego-based Carmel Partners. David Young of the Seattle office of Hendricks & Partners negotiated the transaction. Young tells GlobeSt.com that Carmel Partners owns one other asset in the region, Barclay Ridge in Federal Way, which it is converting to condominiums. Carmel also plans to convert 64 units at Greenbriar into condominiums, according to Young.The cap rate on the investment is estimated at about 5.5%. Despite the aggressive cap rate, Young says the cash-on-cash return is attractive thanks to low-floater bond financing made available because of the project’s affordable component. “A lot of California investors believe the Puget Sound has hit bottom, so they are selling off assets in other markets that are peaking and putting their money into the Puget Sound region,” says Young. “They think there is a lot of upside to be had here.”Greenbriar was one of 12 properties AvalonBay owns in the Puget Sound region. It acquired Greenbrier’s 17 acres for $3.8 million and developed it in 1987 at a cost of $21.2 million, according to the publicly traded company’s most recent annual report. The company subsequently invested another $11.3 million in the property for a total investment of $36.3 million. As of the end of 2003, Greenbriar had a physical occupancy of 91.3%, an average rental rate of $0.93 per sf and an average unit size of 1,074 sf. Of the 40 new apartment developments AvalonBay was considering at the end of February, three are in the Puget Sound region. The company owns or has options for land in Kirkland, Bellevue and Seattle for which it is planning developments of 211 units, 368 units and 194 units, respectively, at a combined cost of $171 million.