The Arboretum at South Mountain

The Arboretum at South Mountain at I-10 and Chandler Bouelvard in Ahwatukee sold last month for $118.3 million – more than twice what the 24-year-old complex sold for four years earlier.

The rush of major investors in gobbling up Valley apartment complexes amid the current and future trends in rent increases came to Ahwatukee with an eyebrow-raising sale.

Just days before Christmas, the Arboretum at South Mountain on the northwest corner of Chandler Boulevard and I-10 was sold for more than twice what the previous owner paid five years earlier.

Built in 1998 and renovated in 2007, the 312-unit mix of 13 three-story buildings was sold for $118.3 million – far more than the $45.5 million it sold for in May 2016, according to Valley real estate tracker vizzda.com.

Sares-Regis Group of Newport Beach, California, bought the property from KB Investment Development at a whopping price of $414 per square foot, or $379,006 for each of the 156 one-bedroom, 132 two-bedroom and 24 three-bedroom apartments. The gated complex includes a health club, clubhouse, pool, garages and laundry facility, vizzda data showed.

Sares-Regis Group describes itself as “formed in 1993 with the intent to develop a pre-eminent real estate development and investment firm on the west coast focused on multifamily and industrial properties.”

Its website shows a portfolio with five different types of multifamily investment funds ranging from acquisition and construction to property management.

“Sares Regis Multifamily transform underperforming multifamily properties into thriving communities and successful real estate investments,” the company says on its website.

Numerous California investment groups in the past 12 months have been among the major investors that have been buying apartment complexes throughout the Valley, often for eight- and nine-figure prices that are twice to three times what they sold for only five or six years earlier, an Ahwatukee Foothills News review of data shows.

“There’s more money than ever betting that apartment rents are heading to new heights,” Bloomburg.com reported, citing a Real Capital Analytics report that investors spent $53 billion on multifamily real estate nationally in just the second quarter of 2021 alone.

Part of the rising interest in apartment complexes, Bloomberg noted, involves a move by real estate investors out of offices, hotels and malls, which it said “fared poorly in the pandemic.”

“The influx of money has pushed prices higher and forced private equity firms to behave like the aggressive homebuyers in the frenzied housing market,” Bloomberg said. “Some investors are frustrated by current prices for apartment buildings. But many are raising their bids, waiving inspections and promising to close fast, with rising rents driving a flurry of deals.”

It quoted one investment activist as stating: “That’s what happens in a white-hot market. Some of them will sharpen the pencil on the next one and get a little more aggressive because they need to deploy that capital.”

According to a number of analysts, the interest in apartment complexes also is being fueled by soaring home prices that have especially impacted first-time homebuyers and aging baby boomers anxious to downsize.

Large investors also aren’t just looking at apartment complexes for the long-term benefit of a steady revenue stream that rent delivers.

The Cromford Report, which closely watches the Phoenix Metro housing market, noted that large investors also are buying single-family homes in bulk – and not turning them over for resale.

Instead, the Cromford Report noted, “investors are extremely interested in purchasing single-family homes in Phoenix. The receipts from rents are rising faster than anywhere else in the country. 

“Rents are rising because there are more people wanting to rent than there are rental properties. Many families are starting to see single-family rentals as preferable to apartments or condo-style rentals. This effect is probably supported by living conditions during a pandemic.

“While this continues, we can expect investor demand to remain robust, which in turn prevents the market cooling down as it would if ordinary home buyers were the only source of demand.”

Manage Case, a company that manages apartment complexes, echoed that lure of rent for investors.

“There is little to support any prediction other than rising rent prices,” it said. “Those hoping for a lull in the rising price trend will likely be disappointed.” 

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