A new wave of real estate investment is sweeping through the East Mill Plain entrance into downtown Vancouver as the market heats up for apartment sites just west of the interchange with Interstate 5.
The projects listed for sale include Prestige Plaza, a newly opened upscale apartment complex completed for $19.8 million and now on the market for $24 million. The Plaza’s much-older neighbor, The Fort Apartments, is for sale as well and is now locked in a deal set to close in mid-June, said Tyler Johnson, a partner with HFO Investment Real Estate, which is representing buyers and sellers of the 48-unit complex. Johnson said the prospective new owners intend to renovate the 1960s-era buildings, which sit on the edge of the southbound ramp to I-5.
Other listings and several million dollars’ worth of additional construction projects illustrate the potential private investors see in the sector. Many envision long-term prospects for the area. They point to deals taking place along the seven-and-a-half-block section from the freeway west to Esther Street along the arterials of Mill Plain and East 15th Street.
“Long-term, you’re sitting on incredible real estate on the corner of Mill Plain (and I-5),” Johnson said. “It could become something very different.”
That future might include office space for a company seeking a highly visible location, Johnson believes. But in the meantime, new owners of the complex expect to update the two-building development and renovate its 48 studio units, Johnson said. He would not disclose the name of his client.
Sellers of The Fort Apartments are Keith Amo and Chris Amo of Portland, owners since 2005, when they purchased the site for $1.49 million. The building now has an assessed value of $1.6 million for 2013 property taxes, according to the Clark County Department of Assessment.
Others see a common theme among the diverse listings in that apartment investments are a hot commodity, whether an older complex such as The Fort Apartments or a newer and upscale building, like Prestige Plaza.
“The developers are trying to catch the window and sell now, when vacancies are low, rents are rising and the overall interest rate is low” for borrowing financing, said Phillip Barry, a real estate broker who specializes in apartment building transactions with Joseph Bernard Investment Real Estate in Portland.
He said it is typical at this time of high demand for apartment investments to see brand-new developments up for sale, even before the complex is fully leased to tenants. About 35 out of 96 units have been leased in Prestige Plaza. The two-building project’s first structure opened to residents in February and the second building opened in March. It includes ground-floor retail space and live-work units, along with about 70 parking spaces tucked between the two buildings.
Investors have inquired about the selling price of the complex since the onset of construction in early 2013, according to Elie Kassab, president and owner of Prestige Development, which developed Prestige Plaza.
“At that time, we were not thinking about selling,” he said, indicating the project is worth the listing price.
“If somebody doesn’t pay what it’s worth, we’ll put permanent financing on it and keep it,” he said.
Prestige Plaza’s rents are characterized as “market rate,” with one- and two-bedroom units renting for between $1,150 and $1,500 per month.
Kassab hopes to sell the complex to generate the capital to launch several other projects — including two more downtown buildings. The first is a smaller, 3,000-square-foot, one-story retail building that will include access for a drive-through window. It will be marketed to bank branches, coffee vendors and fast-food restaurants, such as Burgerville, which sold its longtime downtown walk-up hamburger stand to Kassab. The venue was demolished in order to build Prestige Plaza on the same site.
Kassab’s second downtown development will be some type of residential complex, featuring 47 units. The project on a site Kassab owns at the corner of East 13th and E streets has already gone through development review and was originally planned as luxury condominiums.
“It could change, depending on the market,” Kassab said.
Several more projects are in the works for the downtown stretch of East Mill Plain, including Vancouver’s former City Hall, purchased for just over $2 million by Northwest Property Resources LLC in 2013. The company is in the midst of a $5 million makeover of the site, just west of Prestige Plaza, at which time it will offer leasing on the building and its two-level, built-in parking structure for office users, said Gary Ehrig, a senior vice president with the company.
“We’ll likely be in a position by the first part of June to have the building available,” he said, adding that he feels potential tenants have more confidence in the market.
“There are some parties out there looking for new space,” Ehrig said. “At the end of the day, those that moved forward and made an investment are ahead of the game.”
But the upswing in office leasing isn’t nearly as active as the investment demand for apartment projects, according to Barry, especially with low apartment vacancy rates of less than 3.5 percent in the Portland-Vancouver metro area, according to data tracked by Portland-based Multifamily NW.
“Obviously, the demand is there and we’re playing the catch-up game,” Barry said. “I think the motivation is certainly there to catch that window because that’s the hardest part, nobody knows where its going to end.”
Other new apartment projects in the vicinity include the $18 million West 15 Apartments and The Uptown. The latter will feature a $32 million, six-story complex with 166 total apartment units. The complex will include street-level apartments with brownstone-type walk-ups on Washington Street, 150 underground parking spaces and ground-floor retail space facing Main Street, about seven blocks northwest of Prestige Plaza.
Developers of West 15 say it will bring 120 affordable units, bicycle parking and some vehicle parking to a vacant site between West 15th Street, Mill Plain Boulevard and Columbia Street.
Developers say such projects are in high demand among young adults and baby boomers, two generations that seem to embrace urban amenities located within a walkable street grid. Barry described the trend as one that encourages real estate investors looking for returns on commercial real estate.
“Obviously, apartments have a lot going for them in today’s market, if someone’s looking to sell and maximize the investment,” he said. “How long that streak will last is the question mark. That’s the motivation for any owner to sell in today’s market.”