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Mixed Views on Atlanta Apartments

by Paul Miller, Atlanta, September 2013


While some trends point to increasing values for apartments in the Atlanta area, not everyone is convinced that the market has recovered.


Despite some impressive sales and rising rents for some complexes, not all apartment properties are prospering.


First the Good News


The Atlanta Business Chronicle reported these recent sales:


  • Preston Pointe at Windermere, a 346-unit complex in Forsyth County, sold for $46 million. The previous sales price in 2007 was $36 million.

  • The 530-unit Dunwoody Station along the Atlanta perimeter was purchased for $73 million. It last sold in 2009 for $47 million.


Higher rents are also being reported. For the newest properties, or even older ones that are well-connected to job centers, apartment rents are back to the peak of the mid-to-late 2000s, according to Chris Spain, executive director with Cushman & Wakefield's multifamily practice. "In many cases, we have even bypassed the peak rents of 2007," Spain said.


Reality Check


Higher sales and rising rents for certain properties don't signal a recovery for the market as a whole. Experts are concerned that any perceived signs of recovery may be short lived.


For one thing, analysts say it may be too late to start additional construction. Haendel St. Juste, a senior real estate investment trust analyst with Morgan Stanley told The Wall Street Journal that land prices and development costs are going up and it takes two to three years to deliver new apartments. "The world could be materially different two or three years from now," St. Juste said. "Development risk is much higher this late in the cycle."


Another factor is the influx of government-backed capital. Steve Berman, founder of OA Development said, "The excess capital attracted by this remarkable combination of growing occupancy and rental rates, and the availability of cheap, government-backed debt, is driving prices to unreasonable and unsustainable levels."


Berman explains that fundamentals typically drive the market until excess capital floods and invariably destroys it. He believes the seeds of Atlanta's multifamily destruction are being planted today.