A suburban Bellevue apartment complex nearly doubled its sales price from 2006 when it sold last Wednesday for $121.8 million, or $304,500 per unit. Heitman LLC received a $58.1 million gross profit when joint venture Security Properties and Pacific Life Insurance Company bought the 27.6 acre property located at 5305 Lakemont Boulevard S.E., according to public records.
Davis Vaughn, an investment manager for Security Properties says the decision to acquire the property was due to the rare opportunity to invest in one of the best residential neighborhoods in the Seattle area. “The quick I-90 access provides convenient commuting to some of the top employers in our region and the area demographics are outstanding,” said Vaughn in a prepared statement. “We think our renovation program will absolutely transform the asset and provide the high quality product that Lakemont expects.”
The Overlook at Lakemont is a 400-unit complex built in 1992 that offers one-, two- and three-bedroom apartments with an average size of 981 square feet. Located off Interstate 90 in the Eastgate-Cougar Mountain neighborhood, the apartments are situated in the southeast corner of Bellevue between Lewis Lake Park and Lakemont Park. It is the only apartment development available in the area and according to Matthew Balkman, a principal for Turning Point Realty Advisors, LLC in Kirkland, this exclusivity created its high demand.
“I don’t think there will be many other apartment complexes built in that part of Bellevue, because the location doesn’t offer available space for new construction of that size,” Balkman added.
Balkman continued on to say that the near doubling of the property’s sales price is due to the compression of capitalization rates. Overall rental rates in the area have increased while the capitalization rates have compressed, and the combination of the two result in the increase of property prices, especially in strong submarkets where the vacancy rate remains low.
Many Eastside markets, such as Bellevue, have also experienced rental growth early in the current apartment market cycle, according to Colliers International’s 2015 Seattle Apartment Market Study. Fueled by job growth and relatively few deliveries of new apartment units, these markets continue to have increasing rental rates that have seen a growth of 8.4 percent and a low vacancy rate of 3.8 percent. Over 6,500 units are planned for delivery in the next four years which may impact the rate of rent growth in specific sub-markets, says the same report.
Seattle-based Security Properties has contributed to the Puget Sound region’s rental growth by delivering 556 units into Seattle’s housing market last year with three new residential developments, according to Dupre + Scott Apartment Advisors. It has another three projects under construction, one of these is the residential phase one of Bellevue’s Spring District, scheduled to deliver a total of 771 units. Security Properties’ Spring District residential phase two is a planned project that will provide another 279 units.
Chicago-based Heitman LLC, listed as one of the top 50 apartment owners in the country by the National Multifamily Housing Council, owns two developments that have also contributed to the area’s growth. Seattle residential developments in its portfolio include Dimension Apartments, a 298-unit development located at 225 Cedar Street, and Premiere on Pine, a development that delivered the highest number of units to Seattle’s housing market in 2015 with 386 luxury apartments.