Legacy Picks Up 545-unit Complex for $50M

TACOMA, WA-The third largest multifamily sale in the state and the largest ever in Pierce County occurred here last week when Legacy Partners acquired On the Green Apartments, a 545-unit community adjacent to the Northshore Golf Course. Legacy paid $50.1 million for the property, which was more than 90% occupied at the time of sale.The property was sold and developed by On the Green LLC, whose managing member is Tom Ismon. The 41-acre, 44-building property was developed in three phases from 1988 to 1990. The average unit size is 941 sf and the property includes an on-site daycare facility.Ismon’s broker, Cushman & Wakefield senior director Greg Laycock tells GlobeSt.com the Legacy has multiple options in how to work with the property going forward. The acquisition included some vacant land as well as an approved PUD map that will allow the individual buildings to be sold off to small investors or the individual units to be sold off as condominiums. “It could also be segregated and partially converted,” says Laycock. “The property lays out such that the owner could sell off 111 units as condos and maintain the rest as apartments.”Laycock declined to reveal the initial capitalization rate on Legacy’s investment, but local brokers familiar with the asset tell GlobeSt.com that based on the price paid the rate would be between 6% and 6.5%. That compares to an average capitalization rate of just below 6% for all properties in the region larger than 20 units and selling for more than $1 million.Vacancy in the Tacoma market has dropped 100 basis points since last September to about 6.5%, says Laycock. Market equilibrium is about 5%, which Laycock expects will occur sometime over the next 18 months on the strength of job growth, echo boomers graduating from college and rising interest rates. In anticipation of the further drop in vacancy, concessions are starting to fade and, in the near future, rents will begin to increase. “The situation has a whole bunch of investors very interested in the greater Seattle marketplace,” says Laycock.