A Los Angeles investor relatively new to the market has made his mark in a big way.
Paying $312.5 million for luxury apartment communities in north Scottsdale, Bryan Ezralow just made Arizona history with the largest single-asset multifamily transaction.
The unique property encompasses 724 units composed of the 364-unit Ascend at Kierland and the adjacent 360-unit Elite North Scottsdale, which are branded and marketed separately but share amenities.
“They have separate leasing centers, clubhouses and fitness centers but they do share amenities in the middle,” said Asher Gunter, who along with Tyler Anderson, Sean Cunningham and Matt Pesch at CBRE Group Inc. represented the seller, a joint venture of Bascom Arizona Ventures and Pacific Life Insurance Co.
“There is no wall between the two properties,” he said.
Instead, the two luxury apartment communities are separated by a greenbelt that features a dog park and tennis court. The entire property is surrounded on three sides by Kierland Golf Course.
Ezralow, CEO of Los Angeles-based The Ezralow Co., said he plans to purchase 3,000 apartment units in the Valley over the next six months.
With this most recent deal following the acquisition of Cactus Forty-2 in Paradise Valley earlier this year, Ezralow said he’s about a third of a way toward his goal.
“Competition is fierce for well-located, well-built properties,” he said. “Rents are continually increasing in the marketplace and employment and all the factors we like to see in a market are continually getting better.”
Phoenix led all U.S. metros in rent growth during the second quarter of 2021, with a 15.3% year-over-year increase, according to CBRE research. Similarly, annual rent growth in north Scottsdale outperformed the metro average with a 16.9% increase.
Los Angeles-based Decron Properties Corp. also has been busy acquiring multifamily properties in the Valley, most recently paying $106.5 million for the 300-unit Broadstone Grand in Tempe.
CBRE also arranged the sale of that property, representing the seller, Alliance Residential Co. and partner Appian Capital.
Joe Coleman, COO of Decron Properties, said initial plans were to acquire 1,000 units over 24 months in the Valley, but has since doubled its goal.
While the company doesn’t have any properties in escrow, Decron remains active in the market, he said.
“We’re hoping to receive some word on a few properties,” Coleman said.
“The Phoenix market is one of the most competitive markets I’ve seen in my history of multifamily,” Coleman said. “It’s an exciting time for the Phoenix market.”
Fierce competition in market
“We’ve got three Phoenix assets in escrow right now in Mesa, on the west side and in north Phoenix,” she said.
Those three properties total 751 units, which would add to her existing portfolio of 7,084 units across 28 properties in metro Phoenix.
Fierce competition has been a main staple in the Phoenix multifamily market for many years, she said, as acquisition prices continue to rise.
“If I think a property will sell for $54 million — that’s on the high end — and it goes for $59.7 million, you’re just going, ‘wow,'” she said.
CBRE’s Gunter said he’s seeing more bidding wars for these multifamily properties.
So far this year, CBRE has brokered about $3 billion in multifamily transactions in metro Phoenix, Gunter said.
“I think Phoenix has always been very competitive to buy in this market,” Gunter said. “In the last five years, you’ve seen very deep investor activity for this market.”
A new CBRE survey shows multifamily cap rates are compressed steeply in metro Phoenix.
Cap rates declined most steeply in suburban areas to between 3% and 3.75% during the first half of 2021, from a range of 4.25% and 4.75% in the second half of 2019, according to that study.
The fundamentals for this region are exceptionally strong, said CBRE’s Pesch.
“Occupancies are at all-time highs, supply is not able to keep pace with demand, and the result is unprecedented rent growth, allowing buyers to accept a lower yield on in-place income today with the expectation that this growth will continue,” he said.