TUCSON, AZ-Hamilton Zanze & Co. has entered the local apartment market in a big way: the San Francisco-based firm purchased a seven-property, 1,566-unit portfolio for $46.5 million. This acquisition represents the firm’s largest acquisition this year and increases the company’s portfolio to 14,000 units in fourteen markets and eight Western states including 737 units in metro Phoenix.
The class B portfolio includes Palomino Crossing (240 units), Lakeside Casitas (310 units), Hampton Park (160 units), Cordova Village (322 units), Solano Springs (152 units), San Mateo (254 units), and Highland Woods (128 units). The portfolio was placed into receivership in October 2009, and one asset, Palomino Crossing, was foreclosed by the lender during the sales process.
“These properties are the nicest class B assets in the submarket given the extensive renovations that were done in 2007 and 2008,” says Brad Cooke of Colliers International’s Phoenix office. He and Cindy Cooke brokered the deal on behalf of the lender.
The average per unit price was $29,693, far below the $50,000 per unit the properties would have received during peak years, Cooke says. “These properties traded so far below replacement cost and peak pricing,” he notes. “Hamilton Zanze was extremely smart in pulling this acquisition down.”
Cooke says the deal was extremely complicated deal because there were so many parties involved. Nonetheless, the portfolio received 15 offers, primarily from large private investors.
“Because it was a portfolio and offered the ability to create an economy of scale, a lot of the interested buyers had not owned in Tucson and saw the portfolio as an opportunity to make a big push into the market,” Cooke explains. “The seller financing was also attractive.”
Cooke tells GlobeSt. the prospective buyers made similar offers. “Everyone can get there on price,” he says. “It really comes down to who is most qualified to pull off the transaction and provide certainty of close. That’s part of the reason why Hamilton Zanze was chosen as the buyer. We had worked with them before and knew they had the ability to work through all the hurdles and get to a successful close.”
Hamilton Zanze took advantage of seller financing to acquire the portfolio. The firm expects to realize upside from improving occupancy and eventually from rental rate increases, Cooke says.
“A lot of Tucson owners are still feeling pain, but the market is bottoming out and occupancy is coming back very strong right now,” he explains, adding that the portfolio’s occupancy has climbed 10 percentage points to 86% over the past eight months.
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