Falcon Sells Three Seattle-Area Apartment Projects

In recent months Falcon Real Estate has acted as investment advisor for the sale of three suburban apartment projects on the Eastside of the Seattle metropolitan area. The apartments were sold to take advantage of the general price increase that has occurred in the apartment market across the country, primarily as a result of the increase in condominium conversion activity.

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The first apartment project sold was Bristol Farms, which is a 193 unit complex located in Bothell, Washington. There are 72 one-bedroom and 121 two-bedroom apartments in the project. It is immediately adjacent to North Creek Business Park, the area's largest high-tech and biotech campus. This is a high quality asset in every respect with a great many amenities, including swimming pool, spa, exercise room, and five children's playgrounds. Bristol Farms was sold in May 2006 at a price of $28.5 million, or $147,000 per unit. This price is also equal to a 5.4% capitalization rate. Falcon's client earned an internal rate of return of 25.5% during an 18-month holding period.

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The second sale was of the Chaparral at Klahanie apartment complex in Issaquah, Washington. This property is located within the 900-acre master-planned community known as Klahanie, one of the most prestigious residential communities in the area. The 128-unit residential complex has 77 two-bedroom apartments, 36 three-bedroom and 15 one-bedroom units. The complex features amenities such as an outdoor swimming pool, an indoor spa, a tennis court, a fitness center, and a number of children’s playgrounds. Chaparral was sold at a price of $15,900,000, equal to $124,200 per unit. Falcon's client originally purchased this property in 1996 and earned an annualized internal rate of return of 12.6% during the 10-year holding period.

This property was sold to a syndication that was organized by Falcon Real Estate for the purpose of converting it to condominiums. Because of the low inventory of condominiums in the area, increasing prices, and the popularity of the community, it is anticipated that conversion to condominiums will be well received by home-buyers and will provide the new investors with excellent investment returns.

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The third apartment property was sold in early June. This was Aspen Creek, located in Kirkland, Washington. Aspen Creek consists of 149 luxury residences of which 57% are town-homes. The units are situated in sixteen two-story buildings on a site of approximately 12.5 acres, with a natural wetlands greenbelt located in the middle of the project. The property is located near several major employers including Microsoft's main campus. Aspen Creek was sold at a price of $29.5 million, equal to $198,000 per unit. This relatively high price on a per unit basis reflected the fact that a large proportion of the units were town-homes. This property was originally purchased by Falcon's client in 1997 and an annualized 15.1% IRR was earned during the nine-year holding period.


June 2006