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Apartment complex sales hit 15-year high in 2004, units at 19-year high

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More apartment units were sold in San Diego County in 2004 than in the past 19 years, but many won't stay apartments long, according to a San Diego real estate company.

A Burnham Real Estate Services report said 24,117 units changed hands last year, the highest number recorded since 1985 when 28,363 units were transferred.

Last year's 1,339 apartment complex transactions was the most in 15 years. In 1989, a total of 1,426 transactions took place.

"Strong apartment sales activity is being driven by increased demand for condo conversions as well as by strong consumer fundamentals in the local rental market," said George Carlson, vice president and Burnham apartment specialist.

Sales activity during the fourth quarter of 2004 declined by just 2.7 percent from a year earlier, with 290 sales compared to 298 during the same period in 2003. Even so, the number of individual units involved totaled 5,802, a 16.5 percent increase over the 4,980 units sold in the fourth quarter of 2003.

"This reflects the fact that 10 of the fourth-quarter (2004) sales involved larger complexes with 100 or more units," Carlson said.

The largest fourth-quarter sales involved three complexes in the University Towne Centre (UTC) area, each of which had well over 300 units and each in condo conversion. They were Nobel Court, a 685-unit complex that sold for $149 million; La Cima, a 514-unit development that sold for $131.25 million; and the Venetian, a 368-unit apartment that sold for $96 million.

Other major fourth-quarter transactions in San Diego County included Monarch at Carmel Valley, a 225-unit project in conversion that sold for $83 million; Atria, a 149-unit community in condo conversion in downtown San Diego, formerly known at 101 Market, that sold for $52 million; Summit at Mission Bay, a 324-unit complex in Clairemont that sold for $40 million last year and $29.35 million in 2003; Trails of Bonita, a 176-unit development in conversion in Paradise Hills that sold for $34.5 million; Villa Toscana, a 116-unit apartment in El Cajon that sold for $23 million; and Vista Village Apartments, a 136-unit development in Chula Vista that sold for $15 million.

"Of these nine fourth-quarter transactions, most have already been mapped or are slated for conversion to condos," said Carlson.

The submarket areas that led San Diego County in the number of apartment sales both for the year and fourth quarter were the Coastal North County with 127 sales involving 2,553 units for the year, and 28 sales involving 354 units in the fourth quarter; Inland North County with 120 transactions involving 2,821 units for the year and 29 sales of 244 units in the fourth quarter; and El Cajon, with 90 sales in 2004 that involved 2,433 units, 20 of which occurred in the fourth quarter with 568 units.

In the city of San Diego, the Golden Hill/Southeast San Diego area (encompassing the 92102, 92113 and 92114 ZIP codes) led all city regions with 141 sales (1,060 units) during the year and 38 sales (355 units) in the fourth quarter.

Normal Heights was next with 111 sales (1,210 units) during the year and 27 sales (284 units) in the fourth quarter; and North Park, with 113 transactions (821 units) in 2004, of which 23 (158 units) occurred in the fourth quarter.

The large Metro North region of San Diego -- which stretches inland from Mission Valley north to Rancho Bernardo (and which includes the UTC area), led the entire county in number of units sold both for the year and the quarter. The 36 sales recorded all year involved 4,445 units, and the eight transactions reported in the fourth quarter involved 2,133 units.

"Given the fact there are typically multiple prospective buyers for most properties, the year-end sales totals are indicative of the hundreds -- if not thousands -- of investors and investor 'wannabes,'" said Carlson. "Despite the current unprecedented high pricing, we are seeing continued strong institutional interest along with first-time small investors who see tremendous potential for large and small properties either for conversion or for long-term growth and rental income."

While rents have flattened out during the past two years, MarketPointe Realty Advisors pegged its average monthly rate at $1,170 for the county -- a level that is higher than most areas of the country but still trailing behind places like New York City and San Francisco.

Related Article:

San Diego County apartment rents flattening, vacancies rising (Mar. 28, 2005)

Research: Burnham Real Estate Services | MarketPointe Realty Advisors

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