2 Ann Arbor apartment complexes sold for $85.7M in record-setting deals

Lake Village Apartments is one of two Ann Arbor complexes bought this month in a record-setting deal involving The Habitat Co.

Chris Asadian | AnnArbor.com

Two of Ann Arbor’s largest commercial properties were bought for a combined $85.7 million this month by an entity of the Chicago-based company that had been managing them.

The Habitat Co. LLCacquired Windemere Apartments and Lake Village of Ann Arbor from Northwestern Mutual Life Insurance Company.

The deals set records in the Ann Arbor market for the price paid per unit, signaling local impact of the national multifamily market experiencing a rebound.

Sources said the Windemere deal is a record $92,083 for the 1980s-era property on the city’s north side near Nixon Road.

And the Lake Village deal, at $115,277 per unit in the complex on South Main Street, is the highest in the market, based on information available to Habitat, said Matt Fiascone, senior vice president of finance and investment.

“We think it’s the highest price per unit paid,” he said. “But we think it’s still a really good value. It makes economic sense.”

As proof, Fiascone cited the lending and partnership in the purchase with Goff Capital Partners, a Fort Worth, Texas- based private equity firm. Goff is an investor in both deals.

Both complexes are on the list of Ann Arbor’s largest taxpayers in 2011, with Windemere coming in at number 8 based on a taxable value of $17.25 million and Lake Village coming in at 18 with a taxable value of $10.8 million. Combined, the properties account for 0.6 percent of the city’s total property tax revenue.

Neither property caters to the traditional campus market, Fiascone said, but both benefit from proximity to the University of Michigan and its position as an employment driver in the city.

“Higher education and medical (facilities) are … two of our preferred economic bases that we like to see in markets,” Fiascone said.

Windemere has 480 units: 80 one-bedroom units and 400 two-bedroom styles. Rent is $1,020 to $1,478, and occupancy at the time of sale was listed at 98 percent.

Lake Village rent is $955 to $1,669 for its 360 units that range from one bedroom to three bedrooms.

Habitat’s portfolio - both owned and managed - is largely based near Chicago. It owns 30 properties, and its management portfolio includes apartments, condos, 33 public housing projects and eight affordable housing complexes.

Other states that it operates in include Georgia and Missouri, along with Michigan, where it owns Lafayette Towers in Detroit and manages 5000 Town Center in Southfield and Riverfront Condos in Detroit.

Habitat has about $2 billion in assets and 20,000 units under management, according to its website.

Fiascone, who started working for Habitat in August, said he’s spearheading an acquisition program for the company, making these deals among the first of what’s likely to be a significant increase in its portfolio.

That strategy will be built on the company traditional core of development then acting as owner-operators, he said.

“The history of the company is that nothing is short-term,” he said.

The deals come as the national apartment sector emerges as one of the bright spots in commercial real estate. While residential housing has been battered by the economy, the apartment market now is seeing high occupancies and increasing base rents.

According to the National Real Estate Investor, apartments are outpacing the recovery of other property types as the national apartment vacancy rate fell from 8 percent to 5.6 percent in the third quarter of 2011.

Rents increased 2.3 percent in 2010, according to the same report, due to strong demand and a lack of new construction.

“It’s probably the strongest sector in commercial real estate,” Fiascone said.

He doesn’t expect those factors to change soon in Ann Arbor, he said, despite a wave of new construction near the University of Michigan campus. Student housing is a different niche from Habitat’s properties, he said, estimating that fewer than half of the residents are even graduate students.

The pricing of the apartments is notable in the Ann Arbor market, Fiascone acknowledged.

But he also said it's a good indicator of the local economy and how it's still significantly better than other markets in Michigan.

"Hopefully, times are improving and (will) continue to improve," he said, "at least locally."

Paula Gardner is News Director of AnnArbor.com. She can be reached by email. Follow her on Twiter.