Buchanan Likes Near-Strip Vegas Apartment Market

LAS VEGAS-There’s at least one close-in apartment development in town that has changed hands for reasons other than a condominium conversion–and it’s not being torn down for a casino resort, either. Buchanan Street Partners of Newport Beach, CA, this month began rehabbing a half-empty apartment community one mile from The Strip and plans to keep it as a rental property.Buchanan paid $20.37 million or about $59,000 per unit for the 346-unit property, called Kimberly Place. At closing, the property was 46% occupied, with one entire building out of service. The seller, a small private group out of Los Angeles, had begun kicking out tenants to make way for the renovations and, eventually, change the tenant profile, but never got around to it. “The property was just in bad shape when we got a hold of it, Buchanan VP Craig Reed tell GlobeSt.com. “The seller … had plans to renovate but weren’t able to execute their strategy.”The upside for Buchanan is they received a slight discount because of the vacancy–even though average occupancy in the area is in the 90% range–and can start their renovation plan right away. Working with Atherton Newport Investments, an Irvine, CA-based apartment owner and operator focused on value-added repositioning opportunities in Western markets, $4 million in upgrades are now in the works, including new roofs on all four buildings, new or repairs HVAC equipment and a new fitness/activity/leasing center.”On average, there are 6,000 to 7,000 new residents coming to Las Vegas each month, and apartments near the concentration of jobs along Las Vegas Boulevard tend to experience a high rate of interest from this migration trend,” says Reed. “By taking an underutilized property like Kimberly Place and upgrading it to a higher quality, we see great potential for capturing a substantial increase in occupancy at the property at market rents.”Coupled with the demand for apartments is the fact that the number of units is decreasing. Hundreds of units each year are being taken off line due to casino expansion and condominium conversions. According to Homebuilders Research of Las Vegas, NV, between 10,000 and 12,000 units are slated to be taken offline in the coming years to make way for such projects. As a result, the remaining apartments, even class B and C properties, will become more valuable and see the opportunity for rent increases as the pool of available product tightens. Buchanan expects this will be true especially for the dwindling number of rental units very near The Strip, as new rental product there is unlikely given the competing interests.Located at 895 Sierra Vista Drive, just a couple of blocks from the Convention Center and two miles from Fashion Show Mall, Kimberly Place is comprised of four apartment buildings on about 8.5 acres. The units include studio, one bedroom and two bedroom floor plans. The property has gated access, a swimming pool and spa, basketball and tennis courts, 12 laundry facilities and a barbeque/picnic area. Atherton is overseeing management of the complex and the rehabilitation program.”If we can do our capital renovation program, lease it up to market at market rates, that’s the definition o a successful deal,” says Reed, who expects to hold the property for three- to five years.