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CoStar Market Insights: Ann Arbor Garners Attention From Out-of-State Investors

Larger Properties Are Seeing The Highest Turnover
April 6, 2018
The 551-unit Spicetree Apts. at 4854 Washtenaw Ave. in Ann Arbor, MI

With roughly a dozen trades throughout 2017, Ann Arbor, MI may initially seem like an illiquid market. However, it continues to garner the attention of investors out of state. In fact, more than half of all sales since last year were purchased by investors from New York, New Jersey, Illinois and Texas.

The largest sale last year was for The Haven of Ann Arbor, a 3-Star, 520-unit complex that sold for $71.4 million, approximately $137,300 per unit, at a 6.2 percent cap rate. DRA Advisors, a New York-based company that seeks out larger Class A and B apartment buildings in primary and secondary markets, purchased the property. The asset was 97 percent leased at the time it closed.

Orion Residential, located in Chicago as well as Dallas, purchased two properties amounting to 840 units for a total of $124.75 million. The two properties, Orion Mainstreet and Orion Northstar, which were renamed by the buyer, were about 95 percent occupied at the time of sale.

In another one of the largest recent trades, Spicetree Apts. sold to The Lightstone Group, a NJ-based investor with a presence in 10 states throughout the nation, for $63 million, or about $114,300 per unit, at a 5.5 percent cap rate. The 3-Star, 551-unit complex was recently renovated and boasted an occupancy north of 95 percent.

A large proportion of recent trades in Ann Arbor have been for sizeable properties with solid occupancy making them viable investment options. For companies with a presence in New York, where purchasing a property comes at a substantial premium, Ann Arbor provides a cost efficient alternative.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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