By Jack Stubbs
A recent transaction reflects upcoming changes for Seattle’s University District.
“I think this sale helps solidify the investor interest in the University of Washington [district] and the story behind it becoming a tech hub,” said Dylan Simon, senior vice president at Colliers International’s Multi family Group in Seattle.
On Wednesday, October 16th, the Prexy Apartments in Seattle’s University District sold for $21.5 million, or $325,757 per unit, according to public records filed with King County. The documents list the buyer as an entity associated with Jilu Shi Wudongtuya, a private investor from Bellevue. The seller was Seattle-based Daly Partners, a real estate investment and development firm.
Simon, senior vice president of investment sales, and Jerrid Anderson, senior associate, at Colliers, exclusively represented the seller in the sale of Prexy Apartments. The sale price of $21.5 million represents a cap rate of 3.7 percent. “One of the most interesting things about [the transaction] is the exceptionally high price point and low cap rate,” Simon said.
Located at 4737 Roosevelt Way NE, Prexy Apartments lies in the heart of the University District, just half a mile from the University of Washington campus and less than a mile from access to Interstate-5. This transaction reflects tangible impending changes for the University District, according to Simon. The sale price is one of the signs showing how the U-District is becoming more of a focal point in relation to neighboring areas. “This [sale] really punctuates investor confidence in the direction of the University District in it becoming a primary market, like in Capitol Hill or Queen Anne. This sort of pricing is the pricing you’d expect in some of those more established neighborhoods,” he said.
The 66-unit property was built in 2016, with an average unit size of 461 square feet, according to Colliers International’s property report. The 6-story asset sits on a 9,000 square foot parcel of land. There is an additional 1,610 square feet of retail space on the first floor. The are 42 studio units that average 426 square feet and average rent of $1,550, 20 one-bedroom units that average 483 square feet and rent of $1,650, and 4 two-bedroom units that average 705 square feet and $2,400 in rent.
According to the report, some of the property’s prominent features include floor to ceiling windows, a designated dining area for entertainment, ample in-unit storage space and washer and dryer, luxury vinyl plank hardwood flooring, quartz countertops, stainless steel appliances and balconies with views of the Cascade Mountains. Additionally, there is a rooftop amenity and gathering area.
Change is impending for the University District, according to the report, with tech companies investing heavily in the University and a new Light Rail station planned to open in 2021. Prexy Apartments is a perfect asset for “forward-thinking investors reading the tea leaves of the University District’s growth,” according to the report.
Some of the property highlights include the brand new construction, a contemporary design with modern clean finishes and the opportunity for rental rate increases.
Prexy offers investors with the unique opportunity to invest in the University District at precisely the right time, with some statistics in particular from the report highlighting the property’s appeal, stated the promotional document. The U-District has a rent growth of 6 percent year-over-year, and 46 percent just in the last 7 years. Additionally, the U-District vacancy rate stands at 3.1 percent (having been below 5 percent for the past 7 years); the asset would reflect major private investment in the University of Washington.
“It was a tremendous sale, [and] I think it helps to highlight the attention on the University District, especially with the up zone coming,” Simon said.
In February 2017, the Seattle City Council approved an up zone for the retail corridor of the U-District, allowing buildings to be built up to 320 feet—a change that will increase density in the neighborhood and create new business and employment opportunities in the neighborhood, according to the report. The changes in zoning have led to increased value for all real estate in the U-District, with tech startups in particular being drawn to the area. Some of the statistics highlighted in the property report indicate how the U-District has become the epicenter of Seattle’s tech industry: 35 percent of University of Washington Computer Science graduates work at Amazon, Google or Microsoft; local tech giants donated more than $85 million to the University’s Computer Science department in 2016; and the University has also committed to doubling the number of tech startups from the University by 2020.
Daly Partners develops multifamily properties throughout Seattle, with current projects in Eastlake, Dexter, North Queen Anne and the University District. Some of the company’s projects include Rainier, a 7-story 135-unit property on Rainier Ave. S slated for completion in Spring 2019; Dexter Hayes, a completed 65-unit asset in South Lake Union; and Etruria, a 100-unit project located near Seattle Pacific University. According to its website, the company provides a range of services to potential investors, including researching and evaluating potential investment opportunities, obtaining entitlements, managing the construction process and managing the asset.