Corporate Investors Snapped Up Metro Phoenix Apartments

Article originally posted on AZ Central on September 15, 2023

Investors, many from out of state, spent a record amount of money to buy more than 500 Phoenix-area apartment complexes in 2021 and 2022.

That buying spree led to rent spikes and more evictions, housing advocates say.

About $27.3 billion was invested in 517 Valley apartments during the pandemic years 2021-22, according to an Arizona Republic analysis of real estate records.

The average Phoenix-area rent shot up more than 35% during those two years.

Many of the deep-pocketed buyers paying record prices want a quick return on their money, and boosting rents is how they are trying to do it, according to studies from the nonprofits Americans for Financial Reform and Local Initiatives Support Corp.

During 2021-22, new residents flocked to the Valley. But not enough new apartments were built, and metro Phoenix’s housing affordability problem became a crisis.

This year, evictions have climbed to near-record levels as more tenants can’t afford the higher rents and too many landlords still aren’t taking housing vouchers.

“These big landlords buying so many Phoenix apartments aren’t helping tenants,” said Pamela Bridge, director of litigation and advocacy at Community Legal Services. “Just look at what’s happening with evictions.”

Where investors are coming from

Investors from California spent the most on metro Phoenix apartments in 2021-22. Hedge funds and other institutional investors as well as smaller private funds paid $11.8 billion for 199 rental complexes during the two years.

Texas buyers were No. 2 for spending the most on Valley apartments: almost $2.5 billion.

Arizona LLCs spent $5.15 billion on metro Phoenix apartments during the two years tracked. But many of those groups have out-of-state addresses and aren’t local investors.

Utah investors spent more than $2 billion.

The big buyers

Publicly traded big investor Invesco Real Estate paid the highest price ever for a metro Phoenix apartment complex. In 2021, the firm’s Dallas operation bought the Vaseo apartment complex in north Phoenix for $305 million.

Invesco bought the apartments from a California investor.

California investors bought eight of the 20 priciest Phoenix-area apartment complexes to sell during the buying boom years of 2021 and 2022.

Three of the biggest purchases were made by Texas investors. Utah buyers accounted for five of the priciest apartment complex sales.

Several of the Valley apartment complexes with the most evictions last year sold during 2021-22, according to a Republic analysis of eviction filings.

In 2021, a Delaware LLC managed by a Texas firm paid $127,875,000 for the affordable complex called Oxford Apartments in southeast Phoenix. In 2022, the landlord filed to evict tenants there 126 times, ranking it No. 10 in the Valley for the most eviction filings.

But like with homebuyers dealing with higher interest rates, apartment investors are pulling back on their purchases because of pricier financing. Some big buyers, including New York-based Blackstone, aren’t able to get the rents they need to make profits on the apartments.

“Phoenix pretty much mirrors the rest of the country with a slowdown in sales as a result of the fastest hiking of interest rates in 60 years,” said Thomas Brophy, apartment expert and national director of research for Colliers International of Phoenix.

He said during the first half of this year, there were 13 metro Phoenix apartment sales totaling $982 million. That compares to 82 worth $6.45 billion during the first six months of 2022.