Apartment sales broke records here last year — again.
The standout was Greystar Real Estate Partners' purchase of all four former Legacy apartment complexes from Inland American Real Estate Trust Inc. for a combined $151.6 million.
Greystar, based in Charleston, S.C., and founded and led by Oklahoma native Bob Faith, paid $48.75 million, about $161,000 per unit, for 303-unit Legacy at Arts Quarter, built downtown at 301 N Walker Ave. in 2007. The price per unit was a record across all categories and classes of apartments. The complex is now called Avana Arts District.
Greystar also paid $31.7 million (about $106,000 per unit) for 298-unit Legacy Corner, 777 N Air Depot Blvd. in Midwest City; $38.53 million (about $97,000 per unit) for 396-unit Legacy Crossing, 3131 SW 89; and $32.6 million (about $99,000 per unit) for 328-unit Legacy Woods, 1919 E Second St. in Edmond, and changed their names.
That put the average price per unit for apartments built since 1995 at just more than $112,000 per unit, according to CB Richard Ellis-Oklahoma's year-end multifamily property report.
At the other end of the market, 1970s complexes with more than 50 apartments sold for an average of $22,447 per unit — ranging from $7,729 to $42,669, brokers William T Forrest and Eva M. Wills noted in the report.
Oklahoma City's strong economy continued investor interest, significant purchase and renovation — or demolition — of lower-end properties and the May tornadoes all combined to bolster the market for sales, keep occupancies stable even with new apartments being constructed and push rents up.
“Following the trend of 2012, multifamily in Oklahoma rose to astronomical levels in 2013. With strong demand and new supply, the rising tide of the apartment sector raised virtually all ships,” broker Mike Buhl wrote in Norman-based Commercial Realty Resources Co.'s year-end report.
With the best and newest apartments commanding record prices, Class B properties have become the “preferred asset choice” for investors and demand has grown for Class C properties, Buhl said.
Moore-south Oklahoma City is a “hot spot” for demand as well as construction, he wrote.
“Even before the May tornado, the market had seen numerous planned developments and construction starts. The elimination of about 1,100 homes that were destroyed by the tornado created even more demand in this submarket by pushing occupancy to near full levels,” Buhl reported.
Forrest and Wills noted that apartment construction remains strong and counted eight complexes underway “from Edmond to downtown Oklahoma City and to Norman.”
Downtown “is the focal point,” they wrote, with work ongoing at The Edge with 250 units, Mosaic with 97 units and Maywood finishing with 139 units. Plus, Metropolitan with 300 units, Steel Yard with 250 units and another 200 units west of St. Anthony Hospital are on tap, the brokers reported.
So much construction, while not necessarily too much, “is the main risk to the industry's good fortune,” Buhl wrote.
“This has been occurring over the past few years, but I think has gone somewhat unnoticed because of the overall strength of the market and strong demand for apartments in general. But the tide may turn, sooner rather than later, causing vacancy to increase,” he wrote in the Commercial Realty Resources Co. report. “This would certainly represent a pronounced change from the past few years when vacancy was compressing at record levels.”
However, with occupancy at a decade high, the increased number of apartments likely will meet renter demand rather than surpassing it — by much, at least — keeping investor interest high, according to Buhl.