Phoenix Fundamentals Are a Big Hit With Investors

Article originally posted on Globe St. on January 10, 2019

Phoenix fundamentals are a big hit with investors, who are finding healthy returns and longevity in the market. Chicago-based LaSalle Investment Management has made its first multifamily purchase in the market in years, citing strong job growth and population growth as compelling reasons to invest in the market. LaSalle purchased San Melia, a 488-unit multifamily community in Ahwatukee Foothills neighborhood south of Phoenix in a competitive sale that attracted a double-digit number of bids.

“Phoenix is one of the strongest job growth stories in the country,” Summit Walia, Managing Director of Acquisitions at LaSalle, tells GlobeSt.com. “The types of jobs being added to the market are all high quality and well diversified. Large companies like Wells Fargo, JP Morgan, Intel are all adding lots of high quality jobs. Along with jobs has been strong population growth, and it is attracting young people from across the country. It is still one of the more affordable markets on the West Coast, and we think that we will continue to see an influx of people from higher priced markets like Los Angeles, San Diego and other coastal locations.”

This particular asset checked all of the right boxes for LaSalle, which evaluates acquisitions on a deal-by-deal basis rather than looking for opportunities within a specific market. Ahwatukee Foothills had the right characteristics: access to jobs, freeways, strong demographics and limited multifamily development. “The demographics are very good and the housing values are strong,” adds Walia. “There is also very little new supply in the market, so we think that there is going to be limited competition in the future. This is a well-located deal located next to a large amount of retail and has good access to the freeway and to major employment centers. We think that this is a good opportunity to achieve attractive risk-adjusted returns with an emphasis on income. Yields are compressed all across the country, and this fund in particular is searching for higher yielding deals, and this is it.”

Phoenix in general has become a popular investment market in the last 12 months, and investors are continuing to enter the market. It isn’t surprising that LaSalle wasn’t only investors bidding on this asset. “I think that other people recognized the desirable location and the desirable physical nature of the asset as well,” adds Walia.

LaSalle purchased the property though its open-ended LaSalle Property Fund, and plans to hold the property for the long term. “The seller here did a terrific job of upgrading the common areas and amenities, and they renovated 70% of the units,” says Walia. “While we have some additional plans for some small upgrades to the common areas, our primary objective here is to finish off the renovation to the remaining 30% of the units and hold for long-term cash flow.”

BACK TO TOP FIVE