352-Unit Covington Farms Trades for $72,896 Per Unit

EVERETT, WA-Covington Farms, a 252-unit apartment property here, has changed hands for $25.65 million, or $72,896 per unit. The new owner is JER Partners out of Los Angeles. The seller was Covington Associates LLC of Seattle, which consisted of a large group of tenant-in-common buyers.The property was built in 1990 in South Everett, near Everett Mall. Amenities include indoor and outdoor pools, an indoor full size basketball court and racquetball courts, locker rooms, and a weight-training center. Occupancy is about 96%, the going rental rate is in the mid $0.80s per sf and no concessions are being offered.Jim Claeys of CB Richard Ellis in Seattle represented both buyer and seller, which was a large group of tenant-in-common buyers. JER Partners declined comment, citing extraordinary caution related to the quiet period for JER Investors Trust, which it took public earlier this month.Claeys tells GlobeSt.com that JER had to assume the seller’s over-market Freddie Mac loan as part of the deal. In return, it got a discount on the price–$72,896 per unit–that will allow it to invest another $1.5 million in renovations, push rents a little, and absorb the pre-payment penalty with a new mortgage loan based on the property’s increased value. In so doing, it expects to raise the cap rate to 8% from the current 6.5%.Meanwhile, multifamily sales in the tri-county area continue on their record-setting pace. As of the end of June, multifamily sales at or above $5 million totaled $926 million, which compares to $700 million through the first half of 2004 and $500 million through the first half of 2003, according to CBRE research. Looking ahead, Claeys says there are 12 additional deals in escrow that will add another $200 million. “I think the second half will be even stronger,” he tells GlobeSt.com.As for why, Claeys says it’s the same old factors–high barriers to entry, a shortage of both multifamily units and little properly zoned land for building more, a lengthy permitting process and arduous environmental regulations. Add in improving multifamily fundamentals and an increased amount of capital looking for a good home and you get record sales, he says.