Local Firm Shifting Multifamily Focus to Phoenix

SEATTLE-A local real estate investment company is in the process of selling seven apartment properties in the region with plans to reinvest the proceeds into larger properties in Arizona and Nevada. Mike Sauter, managing partner of the company, S-J Management LLC, tells GlobeSt.com three of the properties have been sold and the other four are under contract.”We’re trading up to the next size and redeploying in Phoenix and Las Vegas,” says Sauter, whose firm invests on behalf of itself and a variety of investors. “It’s an excellent time to sell in this market; investors want to be here because they feel it is a recovering market.”As reported last week by GlobeSt.com, S-J Management sold the 190-unit Westhaven apartment complex in West Seattle for $13.6 million or $71,579 per unit. The sale price translates to a 6.4% capitalization rate for the new owner, a California partnership.In addition, Sauter tells GlobeSt.com that his company also sold the 108-unit Meadowdale Apartments in Lynnwood for $6.92 million or $64,074 per sf, and the 156-unit Brierwood Manor Apartments in Everett for $7.65 million or $49,038 per unit. Sauter says the sale prices equate to cap rates of 5.04% and 5.62%, respectively, while the cap rates on its new acquisitions are in the 6.5% to 7% range.S-J Management conducts its business by forming and serving as the managing member for each of the separate limited liability companies that directly own the real estate purchased with funds of third party investors. Through formation of these various companies (comprised of accredited investors, pension plans, IRAs, profit sharing trusts, etc.), S-J coordinates acquisitions and dispositions of large upscale apartment projects, ranging in size from 100 to 500 units, located throughout Washington and Arizona. S-J also engages in property management and real estate brokerage services for the properties acquired and sold.Sauter says S-J Management’s typical hold period for assets is three to five years, and all of the properties being sold have been held at least that long. Nearly all of the properties being sold are in the 100- to 160-unit and the properties it wants to buy are in the 175- to 300-unit range. “We’re looking to acquire larger, more upscale class A located in the urban core,” says Sauter. “It’s the logical progression.”Having said that, S-J Management has one extra-large metro-area property that is being sold, a 464-unit property in Federal Way. That property is scheduled to close in April, says Sauter.Once all seven properties are sold, Sauter says the firm will have about 1,000 units in the Greater Seattle area, which also are headed to market. In Phoenix, the company is building on a base of about 1,000 units, he says.