Big deals keep on turning: Multifamily acquisitions surging in strong Phoenix market

Los Angeles-based Tides Equities LLC has closed on two of the properties it had in escrow, with another five deals set to close.

These large multifamily transactions are an indication that the multifamily market is heating back up again in a big way.

Tides Equities was in escrow on seven Valley apartment properties totaling 2,400 units earlier this month. Those seven properties average 94.5% occupancy.

The investor teamed up with Chevy Chase, Maryland-based FCP to buy the 515-unit Solara at Mill Avenue in Tempe for $77 million.

As is typical when Tides buys a property, plans call for investing another $6.4 million to renovate the property, said Ryan Andrade, co-founder and principal of Tides Equities.

“The property will look and feel much newer, which will complement the top tier amenity package already on site,” Andrade said. “Post-renovation, the property will be a great option for tenants who want to live in a fresh setting with high-end finishes, yet do not want to pay class A rents, which can be more than 40% higher.”

The other deal in escrow that closed was a 248-unit apartment community at 2101 N. Evergreen St. in Chandler. Phoenix Property Co. sold that community for $46.03 million to Tides and a private 1031 Exchange partner.

The remaining five deals still in escrow comprise 1,697 units for a total price of $260.35 million, Andrade said, adding that they should all close in 2020.

“Tides Equities has been the most active buyer of Phoenix multifamily real estate over the past two years and is now one of the largest owners in the Phoenix market,” Andrade said. “We continue to see strong economic drivers of job growth and in-migration, coupled with a resilient workforce that has shown its strength and diversity during these trying times.”

Phoenix still is the best market in the country for multifamily investments, he said.

Analysts are starting to see the bigger deals like these come through.

In May, the private capital space of between $5 million and $40 million was the first area Jesse Hudson, vice president of investment sales for NorthMarq, said he started to see transactions happening again since the coronavirus pandemic stalled the economy in early March.

“Rent collections and occupancies in Phoenix have stayed strong and on the rise over the past six months,” Hudson said. “When you add in Arizona’s Covid numbers decreasing and employment increasing, you are making the decision for new investors to come to Phoenix very easy. We are seeing the same level of activity now as we were pre-pandemic.”

The only difference now, Hudson said, is the amount of new capital that has entered Phoenix looking to capitalize on the strong fundamentals.

Andrade said it felt like most of the industry was on the sidelines between March and June as the world waited to figure out the true impact Covid would have on the real estate market and multifamily, specifically.

“Tides Equities never stopped hunting for deals even during that time, which put us in prime position to pick up some strong opportunities once groups began getting comfortable with pricing and more willing to transact,” he said. “Covid has validated the strength of investing in Class B apartments, as no matter what is happening in the world, people always need an affordable place to live, especially with stay-at-home orders.”

All that pent up transaction demand is hitting the market all at once, Andrade said.

“The strength of the Phoenix market has been on display during Covid, and has showcased the advantage that a lower cost market holds,” he said.

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