Fresh off a $210 million deal in February on the sale and recapitalization of Optima Sonoran Village Phases I & II, JLL brokered another historic multifamily deal in the Valley in early August.
In one of the largest dollar amount transactions in Arizona history, Blackstone Real Estate Investment Trust Inc., or BREIT, purchased a six-property portfolio for $311 million. JLL’s John Cunningham and Charles Steele led the team that brokered the deal between BREIT and sellers DRA Advisors LLC and The Milestone Group.
“It’s the biggest deal I’ve worked on as a broker,” said Steele, JLL’s managing director who also brokered the Optima Sonoran Village deal. “I’ve purchased a portfolio when I worked for Alliance Residential in 2006 that was almost $500 million, but that was in three states and four cities. This is by far the largest portfolio I’ve done exclusively in Arizona.”
The process at JLL began back in April when they launched the sale of this portfolio of multifamily facilities scattered across the Valley.
“We did not go to the masses, it was kind of a targeted marketing campaign,” said Steele. “We wanted to ideally find a portfolio buyer, which we inevitably did.”
The deal was put under contracts by the end of May and then closed in early August, which is a standard due diligence and closing timeline, according to Steele.
The six properties that BREIT purchased in this deal are part of a recent push into the market. According to Business Real Estate Weekly of Arizona, since 2017, BREIT has invested $649 million into the Phoenix market to buy 3,751 apartments in 12 units.
“I think they see Phoenix as a strong growth possibility,” said Steele. “We have some of the most affordable rents in the west. I think its easier to grow rents from a lower base and I think they see the affordability of Phoenix is better than other western markets, so you should be able to grow rents better because your residents can afford them.”
The newest of the six facilities in the deal is The Residences at Stadium Village in Surprise, which was built in 2009 and the Waterford at Peoria property was built in 2008. The other four complexes were built in 2000 or earlier and Steele expects BREIT to make some improvements to those older facilities to increase their value.
“There was definitely some value-add in the older builds,” Steele said. “For those older ones, they definitely saw some upside to asset management or doing some renovations.”
The Sierra Canyon apartments in Glendale was built in 2000, Sierra Foothills in Phoenix was built in 1999, Finisterra apartments in Tempe were built in 1996 and Lumiere Chandler was built in 1995.
The most expensive of the six properties was the 382-unit The Residences at Stadium Village, which sold for $67.85 million.
According to its website, Blackstone is the world’s largest alternative asset manager, with $439 billion in assets under management, including $119 billion in commercial real estate.
“They’ve been active in other markets, so this isn’t their primary market,” Steele said. “They are selling a portfolio as well, right now. That portfolio is not going to be as large from a dollar amount, but they definitely like Phoenix. They definitely like the economic indicators of this market.”
