2015 apartment transaction volume exceeds $1 … states...2015 apartment transaction volume exceeds...
TRANSCRIPT
2015 apartment transaction volume exceeds $1 billion for the first time
Research & Forecast Report
MINNEAPOLIS-ST. PAUL | APARTMENTQuarter 4 2015
Overview The Minneapolis-St. Paul apartment market benefits from a strong, diverse regional economy steadily growing at an average of 2.5 percent over the past three years. Strong job growth puts Minnesota first in the nation on Gallup’s 2015 Job Creation Index.
After the final tally, 2015 transaction volume surpassed $1 billion, setting a new highwater mark for the Twin Cities market. Much of this dollar volume was contributed by large Class A stabilized and presales, a telling sign of our development landscape and how national investors perceive the Twin Cities’ market fundamentals. Though 2016 might hedge a bit from the banner year we saw in 2015, there are good indications that the investment, development and operational landscape will remain strong.
Transaction Activity With a record year in terms of dollar volume, we reviewed transaction volume to see if that picked up as well. Interestingly, our market has remained fairly steady dating back to 2012 with annual trades at or above $750,000 numbering about 120-140 each year.
When we solved for other minimum dollar values, the number of trades remained steady. This tells us that while private capital sales have traded at a steady annual clip post-recession, larger, institutional sales have picked up significantly. And with the number of national investors interested in the Twin Cities market, that is not a surprising theme. We expect total annual sale dollar volume to stay above historical averages as institutional investors continue to pursue large acquisitions.
On the private capital side, we are experiencing a greater influx of outside capital chasing smaller deals as well. It is not unusual to work with individual or smaller private capital groups on listings below $5mm. Part of this is due to technology providing a national platform for listings, but a key piece is the fact that the Twin Cities are becoming well-known as a stable, conservative market for multifamily assets while also providing good yields. This has increased competition on listings and provided sellers greater access to the national marketplace, which we see continuing in 2016.
Market IndicatorsRelative to prior period Q4 2015 VACANCY RENTS TRANSACTION ACTIVITY
PRICE PER UNIT
CAP RATES
2,000
4,000
6,000
8,000
10,000
0
2,000
2008 2009 2010 2011 2012 2013 2014 2015
Under Construction Completions
Source: MPF Research
8,000
6,000
7,000
5,000
6,000
4,000
5,000
Unit
sU
nit
sU
nit
sU
nit
s
3,000
4,000
Unit
sU
nit
sU
nit
sU
nit
s
1,000
2,000
3,000
0
1,000
0
2013 2014 2015 2016 (Forecast)2013 2014 2015 2016 (Forecast)
Source: MPF ResearchSource: MPF Research
2 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Apartment | Colliers International
New Construction Developers delivered roughly 4,000 units in 2015, a decline from the 5,500 units delivered in 2014. The supply pipeline for 2016 looks similar, with 4,100-4,400 units expected to deliver.
As a whole, new deliveries were well-received by the market. Lease-ups were successful almost across the board, with some exceptions, and absorption figures imply that demand is still unmet in urban areas, even those that have seen a large number of deliveries during this cycle.
A shift to suburban development is underway, with new projects being proposed in submarkets that have not experienced new construction recently. The typical strongholds like Edina, Bloomington and St. Louis Park continue to see new proposed projects, while markets like Woodbury, Eagan, Maple Grove, and Minnetonka broke through this past year. We see this shift continuing to reach further out into the suburbs and into historically less-desirable submarkets as developers search for opportunities.
On the cost side, increasing land, labor and material pricing is having a significant affect on feasibility. Without tax credits, TIF or other subsidy sources, many projects ultimately die at the drawing board despite city approval. With construction costs increasing anywhere from 10-25% over the past two years for a given project and rental rates not seeing significant increases in many suburban markets, the numbers often don’t work without some form of subsidy.
Units Under Construction
(2)
(1)
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1
2
3
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2008 2009 2010 2011 2012 2013 2014 2015
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Monthly Employment Trends
Apartment Construction: Completions by Date
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$200
$300
$400
$500
$600
$700
Pri
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Tota
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ale
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$20,000
$40,000
$0
$100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tota
l S
ale
s V
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me
Total Quarterly Volume $ (mil) Avg. Price Per Unit
Source: Real Capital Analytics
3Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Apartment | Colliers International
Market Statistics The vacancy rate in the Minneapolis-St. Paul apartment market is 2.9 percent as of quarter four of 2015. In terms of high occupancy, the region is in the top 10 in the nation and among the top 5 in major Midwest markets. Rental rates continue to grow across product classes, and an increase of 3.2 percent was posted for 2015.
Due to the influx of supply, particularly in downtown Minneapolis, Uptown and near the University of Minnesota, Class A properties have lower, but still strong, occupancy levels which are expected to stabilize as initial lease up completes and the influx of supply tapers. Whether occupancy remains stable on Class C properties long-term is a trend to watch later in 2016.
610 West The Doran Companies, an active multifamily developer in Minneapolis, is under construction on 610 West, a 484-unit apartment complex in Brooklyn Park. The project is located a block from Target’s corporate campus.
Valley Creek In the largest sale of 2015, Valley Creek Apartments was purchased by Marquette Companies for $54,250,000. Valley Creek is located in Woodbury, a second-ring suburb that is finally seeing new multifamily development.
Over the past few years, development and investment has focused on in-demand areas such as Downtown Minneapolis, near the University of Minnesota, Uptown, and a few first-ring suburbs. The below transactions represent a growing trend towards development and investment outside of the urban core and into the second-ring suburbs.2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
$900
$950
$1,000
$1,050
$1,100
$1,150
Perc
ent
Vacant
Perc
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Vacant
Perc
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ent
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Unit
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ly R
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Unit
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$800
$850
2008 2009 2010 2011 2012 2013 2014 2015
Avera
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Per
Unit
Avera
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onth
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Per
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Avera
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Per
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Avera
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onth
ly R
ent
Per
Unit
Average Monthly Rent Vacancy
Source: MPF Research
Average Rent & Vacancy
Apartment Sales
4 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Apartment | Colliers International
Significant Apartment Sale Activity
BUILDING CITY SIZE (UNITS) YEAR BUILT BUYER SELLER SALE PRICE PRICE PER
UNIT
222 Hennepin Minneapolis 286 2013 Weidner Apartment Homes Invesco Advisors, Inc. $91,450,000 $319,755
Dinkytown Portfolio Minneapolis 308 2009-2012 University Communities Doran Companies $83,500,000 Mixed use
7 West Apartments Minneapolis 218 2013 Weidner Apartment Homes TE Miller Development LLC $54,500,000 $206,500
Valley Creek Apartments Woodbury 402 1987 Marquette Companies Trilogy Real Estate Group $54,250,000 $134,950
The Walkway Minneapolis 92 2014 J.P. Morgan Investment Management Inc. DM Companies $53,750,000 $437,500
The Concierge Richfield 698 1968 MLG Capital, LLC TE Miller Development LLC $41,000,000 $58,739
Louisiana Oaks Saint Louis Park 200 2001 Sidal Realty MSP Real Estate Inc $39,100,000 $195,500
The Paxon Minneapolis 140 2015 Clarion Partners Sherman Associates, Inc. $38,750,000 $276,786
The Residence at the COR Ramsey 230 2013 Weidner Apartment Homes Flaherty & Collins Properties $37,500,000 $163,043
Thomas Lake Pointe Eagan 216 1987 Nationwide Housing Corporation Dominium $31,000,000 $143,519
Velo Minneapolis 101 2014 Clarion Partners Aurora Investments /Sentinel Management $30,975,000 $306,683
Uptown Portfolio Minneapolis 194 Hornig Companies, Inc. Apartment Management Co Lllp $25,180,000 $129,794
Provence Luxury Apartments Burnsville 157 2001 CAPREIT Boisclair Corporation $20,150,000 $128,344
Solhem Minneapolis 60 2009 The Laramar Group, LLC Solhem Companies $15,675,000 $261,250
Hart Lake Apartments Columbia Heights 145 1969 Northstar Properties Steven Scott Management $13,300,000 $91,724
Lofts at Farmers Market Saint Paul 57 2012 Weidner Apartment Homes City of St. Paul $13,200,000 $231,579
Marketplace & Main Hopkins 53 2012 Doran Companies Beard Group, Inc. $12,800,000 $241,509
Blaine Courts & Cloverleaf Courts Blaine 158 1990/2000 Lang Nelson Associates,
Inc.Blaine Economic Development Authority $10,650,000 $68,269
2920 Dean Pkwy Minneapolis 54 1953 Highland Management Group Inc. Kraft and Company $9,000,000 $166,667
Granite Trails Apartment Maplewood 108 1970 Dennis A. Homel Canvasback Investments $7,624,000 $70,593
California Drive Apartments Saint Paul 108 1949 Hornig Companies, Inc. Oaks Properties, LLC $7,500,000 $69,444
Edina Seasons Edina 44 1968 Aldrich LLC Shawn Punjwani $6,164,056 $140,092
Seward Flats Minneapolis 123 1964 Quality Trusted Commercial Sherman Associates, Inc. $6,100,000 $49,593
Groveland Terrace Maple Grove 48 1997 Scott M. Weber Premier Real Estate Management LLC $6,050,000 $126,042
Cottage Villas of Arden Hills Arden Hills 60 1994 St Louis Park Place Llc Cottage Villas Of Arden
Hills Lp $6,000,000 $100,000
Fountain Terrace New Brighton 72 1964 Real Estate Equities Interstate Partners $5,800,000 $80,556
The Alden Apartments Minneapolis 68 1925 Employment Advisors Intr Inc
Community Housing Development Corporation $5,800,000 Mixed use
Park Place Apartments Saint Louis Park 66 1967 TB2000 LLC Scott M. Weber $5,375,000 $81,439
Dellwood Centre Apartments Anoka 60 1985 Norlin Boyum Lafromboise, Gary $5,350,000 $89,167
Mill Pond Gables Champlin 48 1997 Avinity City of Champlin Economic Development Authority $4,420,329 $92,090
5Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Apartment | Colliers International
Significant Apartment Sale Activity
BUILDING CITY SIZE (UNITS) YEAR BUILT BUYER SELLER SALE PRICE PRICE PER
UNIT
The Denn Minneapolis 47 1966 CPM Companies - The Elysian Christensen & Laue PA $4,250,000 $90,426
Phalen Shores Apartments Saint Paul 53 1987 Steven Scott Management Lake Phalen Housing
Limited Partnership $4,150,000 $78,302
Crest Oak Apartments Coon Rapids 60 1972 Crest Oaks LLC West Suburban Housing Partners $4,117,820 $68,630
Crest Oak Apartments Coon Rapids 60 1972 Steven Scott Management Stifel, Nicolaus & Co., Inc. $4,117,820 $68,630
Cornerstone Estates Saint Paul 64 1969 InMotion Company Pine Ridge Capital $3,910,000 $61,094
Multi-Property Sale Minneapolis 23 1931 Hornig Companies, Inc.Apartment Management Co - Calhoun Beach Apartments
$3,887,000 $169,000
The Crystal Minneapolis 30 1986 Pergola Management Nath Companies, Inc. $3,650,000 $89,024
Maplewood Townhomes Maplewood 42 1996 H.V Val J. Rothschild, Inc. Everwood Development $3,600,000 $85,714
Douglas Drive Terrace Minneapolis 46 1962 Bob Gardner Lori S Bart $3,100,000 $67,391
200 West Apartments Bloomington 36 1971 Buck Properties II, LLP Liechty Associates $3,000,000 $83,333
Imperial Heights Apartments West Saint Paul 67 Reacor Ltd. Duke Financial Group,
Inc. $2,995,000 $69,651
Evergreene Apartments Osseo 45 1970 Mala Himraj Hall Property Management $2,990,000 $66,444
Queens Lane Apartments Anoka 12 1963 Brett C Lillemoe Dennis A. Homel $2,970,000 $247,500
George Street Apartments Saint Paul 45 1967 Hempel Sela Investments, LLC $2,850,000 $63,333
Twin Lakes Apartments Robbinsdale 36 1971 Scott Cooper At Home - Twin Lakes Apartments $2,690,000 $74,722
Anoka Flats Anoka 36 1968 Dan Kraft Scott M. Weber $2,628,000 $73,000
Multi-Property Sale Saint Paul 36 1962/1974 Real Estate Equities Christine Stassart $2,525,235 $70,145
Lonnie Adkins Court Saint Paul 77 1973 Dominium H.V Val J. Rothschild, Inc. $2,407,609 $31,268
Brookview Manor Maplewood 36 1965 Azam Haji M & Huma Z R&R Commercial Properties, LLC $2,225,000 $61,806
7300/20 Cedar Ave. Richfield 36 1965 M Club Investments Llc Hornig Companies, Inc. $2,132,500 $59,236
Cottage Grove Estates Cottage Grove 24 1986 Cottage Grove Estates LLC Eagan Hills, LLC $2,125,000 $88,542
Oak Hills Apartments Fridley 34 1962 Brett C Lillemoe Scott Weber Humboldt, LLC $1,975,000 $58,088
Beltami Park Apartments Minneapolis 24 1965 Alma Equities Llc Michael & Charity Seeger $1,900,000 $79,167
Art Institute Apts Minneapolis 37 1913 TLP Services Shawn Punjwani $1,818,100 $49,138
Pleasant Avenue Villas Saint Paul 23 1964 1296 Pleasant Avenue LLC Pleasant Avenue Properties, LLC $1,750,000 $72,278
149 Virginia Saint Paul 23 1950 Scott M. Weber John T & Gina Mcgovern $1,700,000 $73,913
Beard Avenue Apartments Brooklyn Center 24 1966 6101, LLC Quality Trusted Commercial $1,700,000 $70,833
Holmgren Apartments II Minneapolis 27 1964/1970 Southeast Flats Llc Gary G & Susan D Holmgren $1,680,000 $62,222
The Gables Minneapolis 17 1908 Maven Real Estate Partners
Persaud Properties Investments, Inc. $1,675,000 $98,529
6 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Apartment | Colliers International
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INTERSTATE
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New Apartment Construction
7Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Apartment | Colliers International
New Apartment Construction
Ted Bickel | Vice PresidentDIR 952 837 [email protected]
For further information please contact:
Julie Lux | Sr. AssociateDIR 952 897 [email protected]
Kevin Doyle | Vice PresidentDIR 952 897 [email protected]
BROKERAGE SERVICES CONTACT:William M. Wardwell SIOR
Executive Vice President | Brokerage Minneapolis-St. Paul+1 952 897 [email protected]
FOR MORE INFORMATION:Maura Carland Director of ResearchMinneapolis-St. Paul+1 952 828 [email protected]
Copyright © 2016 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
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