The Presidential City apartment complex in Philadelphia has been sold for $357 million, as reported in the Wall Street Journal. The sale is said to be the highest price ever in that city for a multifamily property. The complex was acquired by KKR.
The Sale: Presidential City (Philadelphia)
The sale is noteworthy for several reasons. First, it comes during the same week The Real Deal was reporting the multifamily market to be in a virtual standstill over buyers unwilling to lower prices even as interest rates climb.
Second, the sales price gives investors a new benchmark to weigh. The sales price represents a cap rate of 4.59% to 2021 NOI. It also represents about $357,000 per unit. The property was valued at $380 million in 2019 so the sale price represents a discount of 6.05% to that value.
The complex is made up of four 12-story buildings and totals over 1,000 units.
Digging into NOI
Trepp recently released an analysis on cap rates on how recent sales continue to hover around 4% of 2021 NOI. A survey of recent multifamily sales done by Trepp in September revealed that implied cap rates continued to remain at just under 4% of 2021 NOI last month. Since the run-up in interest rates over the last six months, Trepp analysts have been keeping an eye on cap rates to see if they have kept pace with the run-up in Treasury yields since February. The short answer is that while cap rates have climbed, the increase has been a fraction of the increase in Treasury yields.
The methodology for the calculation is as follows: Trepp looks for multifamily sales for properties that back government-sponsored enterprise (GSE) loans. Then, the team reviews the most recent full-year net operating income (NOI) to calculate an implied cap rate. Want more? Access the full cap rates analysis here.
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