Investors buy Pittsfield Township apartment complex for $7M
Oakland County investors are the new owners of a Pittsfield Township apartment complex on Carpenter Road that went back to the lender in 2009.
That price is $700,000 more than the asking price listed in bid packets that set a Dec. 9 deadline, a scenario that the listing broker and the buyers said speaks to the strength of the Washtenaw County multifamily market.
“There was a lot of competition,” said Bill O’Connor of CB Richard Ellis.
O’Connor said he fielded 17 offers for the 336-unit complex on 22 acres between Packard and Ellsworth roads. About half were above the list price, prompting two rounds of additional bidding before mortgage underwriter Freddie Mac chose the buyer.
Both O’Connor and Freddie Mac representatives thought the asking price was the top of the market, O’Connor said, but investors saw additional value.
“Ann Arbor is still one of the most insulated (and) one of the most attractive markets in Michigan, and that helped to drive it,” he said.
Robert Lenz, a managing partner in the new ownership group, Royal Oak-based Hillmount Ridgewood LLC, said the property’s location played a big role in the acquisition.
While properties in Ann Arbor with proximity to the University of Michigan are setting price records, Ridgewood presented a good location at a significantly lower price.
One buyer just bought Windemere and Lake Village apartments in Ann Arbor, with the Lake Village deal a record $115,277 per unit for the non-student complex.
That compares to Ridgewood’s $20,833 per unit. While it has an Ypsilanti mailing address, it’s still commutable to Ann Arbor while offering proximity to U-M and Eastern Michigan University, Lenz said.
“It’s a great location with access to jobs and the universities, and the Ann Arbor schools,” he said.
The complex was built in the 1970s. The average rental rate for a 850-square-foot two-bedroom units there is about $770 per month.
The capitalization rate - or rate of return, based on the purchase price and the net operating income - is about 8 percent.
However, that number is based on a 79 percent occupancy rate. Lenz said he sees potential to increase the return after making some minor cosmetic improvements and increasing the occupancy to the market average, which is much higher.
Multifamily housing is a strong commercial real estate sector, with financing available. That makes it heated in recent months, O’Connor said, with national and Michigan chasing deals like Ridgewood.
Investors are looking for quality properties again, “and they’re paying more than they have over the last few years,” said O’Connor, who worked with fellow CBRE broker Keith Johnson on the deal.