In the early 2000s, Phoenix, Ariz., was one of the fastest-growing metropolitan areas in the U.S. But in 2008, in the midst of the Great Recession, Phoenix housing prices declined quickly. Numerous Alaskans flocked to the area to purchase second homes or investment properties at bargain rates.
With a desire to diversify its real estate portfolio and take advantage of the low prices, CIRI Land Development Company (CLDC) made the strategic decision to make the most of the “buyer’s market” that occurred in the multifamily segment, ultimately investing in seven Class A and A+ Arizona properties, the majority of which were purchased in late 2010 and into 2011.
CIRI acknowledged the need for a strong, expert partner to help identify properties with growth potential. Owing to its reputation and success in the industry, CIRI partnered with Weidner Apartment Homes, a real estate investment, development and management company with strong ties to Alaska that specializes in multifamily rental housing. Weidner quickly made the Arizona properties successful and decreased vacancies while cutting operating costs as the industry recovered from the recession.
“Multifamily apartments continue to be a prudent investment. Nationwide, apartment vacancy remained tight in 2017, at just over 7 percent – a 20-year low,” said Chad Nugent, vice president, CIRI Real Estate. “These low vacancy rates, coupled with historic-low interest rates, have fueled the strong value appreciation in our Arizona portfolio and allowed us to harvest some of that growth in the properties that have reached stabilization.”
One of the properties in which the CLDC/Weidner team invested was Red Mountain Villas, a 768-unit apartment community that offers outstanding access to many of Phoenix’s employment corridors as well as shopping, dining and recreational opportunities. In addition to its prime location, Red Mountain Villas boasts swimming pools, spas, a fitness center, and sand volleyball and racquetball courts.
To compete with newer developments in the area, the facility required significant finish upgrades. As such, it was marketed as a value-add investment, meaning the improvements would increase its level of return once completed. Marketing efforts elicited strong interest, and the property was recently sold to an investor at a healthy return.
“Real estate in Phoenix has rebounded and been great for several years – it’s now one of the top growth areas in the nation,” Nugent said. “The strength of the multifamily apartment homes market segment positions us well for growth in our remaining properties. It’s great to see the multifamily investment strategy in Arizona go as planned, and be able to harvest some of the growth so it can be redeployed in other investments and keep CIRI diversified as we work to grow shareholder dividends.”