"This is our first acquisition in Arizona," says Marc Paul, president of SCI Real Estate of Los Angeles. "We really like the location of the asset, which is near two new freeways and several corporate offices [like PetsMart and USAA]. … A lot of new jobs are being created from the corporations nearby."
The class A Deer Valley Village contains 360 one-bedroom units, 356 two-bedroom apartments and 116 three-bedroom designs. Units average 800 sf and rent for about $1 per sf. The complex, built in phases in 1996 and 2000, is 94% occupied.
"We think that the Phoenix apartment market has suffered a bit, but with the economy making a bit of a turnaround and fewer people fleeing to buy homes, we'll probably see some upside as well," Paul says.
Paul tells GlobeSt.com that SCI Real Estate competed against 19 investors for the complex, which ended up trading at a 6.1% cap rate. "A few years ago the only buyers for a $71-million asset would have been a life company, pension fund or a REIT," he says. "There's new player in town. … TIC investors are competing in deals we wouldn't have been able to compete in before."
SCI Real Estate did not have any trouble coming up with the capital either. "We have a network of people looking to place 1031 Exchange funds when we locate a quality asset," Paul says. "The equity for this asset was fully subscribed in about three days."
SCI Real Estate is looking to make more acquisitions in the "desert," Paul says. "Over the next 12 months, we would like to invest another $500 million nationally and we have no problem allocating as much as 25% into the Phoenix market."
SCI Real Estate was represented internally by CEO Robert Robotti and Scott Derrick, senior vice president of acquisitions. Tyler Anderson and Sean Cunningham with CB Richard Ellis Inc. in Phoenix represented Archstone-Smith.
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