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Value-Add Players Get Shot at MD Apts

Class B Property Should Command $80M Bids
February 14, 2018
A suburban Washington apartment property ripe for renovations is up for grabs, and should appeal to value-add investors.

The Glendale Apartments, at 9971 Good Luck Rd. in Greenbelt, MD, is a 486-unit, garden-style complex. The owner is a private investor who has hired CBRE’s Mid Atlantic sales team, led by William Roohan and Michael Muldowney, to market the property for sale.

Built in 1968, the 501,086-square-foot multifamily community was last renovated in 2006. Occupancy is currently at 95 percent.

Market players think it could fetch bids of $165,000 per unit, or about $80 million. That would translate into an initial cap rate in the high 5% range, say local experts.

The property is in the Lanham section of the city of Greenbelt, about 15 miles northeast of downtown Washington, in Prince George's County.

Suburban Washington’s older Class-B rental properties have become a favorite target for investors in recent years. While nationally, apartment sales fell slightly last year, Washington - one of the first apartment markets to recover from the recession - continued to grow.

"Renovating these three-star properties are a great way to boost a little extra yield," says Julian Spiker, market analyst for the D.C. metro area with CoStar Market Analytics. "They’re a little more attractive because rent growth is more resilient. We saw a slowdown in the D.C. Metro rent growth last year, but it was mostly in four- and five-star properties."

CoStar research shows $9.9 billion of apartments traded in the District and its suburbs in 2017, compared to $8.5 billion in 2016. Much of that sales volume was concentrated in the Maryland and Virginia suburbs and was comprised of older, fixer-upper properties where investors have a chance to juice rents and returns through improvements.

A new owner of the Glendale would likely look to pump money into interior improvements to the appliances in the kitchen and the fixtures in the bathrooms. The property’s amenities, which include a pool and playground, could also be improved.

Newer rental properties in the area capture rents as much as $350 per month above Glendale’s current asking rate, according to marketing materials.

John Doherty, Multifamily Reporter  CoStar Group   
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