Pittsburgh’s apartment buildings attract considerable national interest
Pittsburgh’s apartment buildings attract considerable national interest, By Sam Spatter, Thursday, Sept. 27, 2012.
Pittsburgh’s tight apartment market — with the lowest vacancy rate in the nation — is one reason owners of Downtown apartment buildings are putting their properties up for sale in hopes of getting top dollar.
The latest is the 242-unit Pennsylvanian. Tom J. Hacker, asset manager with Brothers Property Corp. of Coral Gables, Fla., the owner, said the former Pennsylvania Railroad Station, Downtown, was listed for sale about a month ago because “the time was right and nationwide apartment sales are at a historical high.”
The conversion from an active railroad station was completed in May 1988. It opened in 1901.
Out-of-town buyers are flocking to the region, experts say, which was demonstrated by the recent sales agreement obtained from an unidentified out-of-town buyer on the 402-unit Washington Plaza, also Downtown, said Rosina Scalamogna, property manager. The owner is WP Partnership, of Detroit, which acquired the building more than 60 years ago.
One buyer — PMC Property Group of Philadelphia — has been actively purchasing Downtown office buildings. Their goal is converting them into primarily rental apartments. It acquired a Downtown apartment building, the Penn-Garrison. They increased the number of units there from 117 to 150.
One party interested in the Pennsylvanian is Morgan Communities of Rochester, N.Y.
“We are interested in Downtown apartments, and we have toured the building,” said Kevin Morgan, vice president. He declined to say whether his company has made an offer.
The low apartment vacancy rate in Pittsburgh helped bring his company to the region several years ago, Morgan said. Even if the vacancy rate wasn’t low, his company would be interested because it likes Pittsburgh’s resurgence as one of America’s most livable cities.
His company is building two apartment complexes in the region. One, Rochester Village, a 228-unit complex, is under construction in Cranberry. The first building scheduled to open in December. The other is the 370-unit The Reserve at Southpointe, scheduled for ground-breaking in October with occupancy next spring.
Morgan said his company is actively looking at existing (apartment) properties here. That could include four properties owned by Nationwide Realty of Columbus, Ohio.
Tina Guegold, marketing manager for Nationwide Realty in Columbus, Ohio, declined to comment on its four Pittsburgh apartment holdings.
Several reports have placed the region’s apartment vacancy rate at or among the lowest nationwide for a couple of years.
PF Research in Dallas reported the Pittsburgh region’s vacancy rate at 1.4 percent. The only one of 100 metro areas with a vacancy rate lower than 2 percent reported during the second quarter.
“One problem in Pittsburgh is it does not have enough (apartment) product for investors who normally like apartments that are less than 10 years old and have from 200 to 300 units,” said Greg Willett, vice president of MPF Research, a division of RealPage Inc., an apartment research firm in Dallas.
Institutional buyers like the Pittsburgh market because of its high level of rental consistency in recent years and it’s emergence as an energy market. Apartments in Pittsburgh, and others nationally, are attracting higher prices, Willett said.
Many developers are interested in building apartments in the Pittsburgh region, but often can’t find adequate land, he said.
“Pittsburgh’s apartment market is very strong, with a vacancy rate significantly lower than those nationally, and rents have been trending upwards,” said Ryan Severino, senior economist with Reis Inc., a New York real estate research firm.
“Also, Pittsburgh’s economy is diversified with its universities, medical and financial services. It has been good reinventing itself,” he said.
Hacker of Brothers Property said there were a number of factors leading to his company to decide the time was right to put the Pennsylvanian up for sale.
“We decided the apartment market was strong, particularly in Pittsburgh, and since we are an institutional type investor, we tend to sell our real estate when the market is good.”
He said there is no set time to keep the Pennsylvanian on the market, although it would not be indefinitely. It has received preliminary interest from buyers, he said. Hacker said CBRE Inc.’s Pittsburgh office is the marketing agent.
“It is not surprising that Pittsburgh is attracting out-of-town investors, not only just for its apartments, but for offices and industrial products,” said Gregg Broujos, a principal founder of Colliers International/Pittsburgh.
Broujos said while PMC Property Group’s active role in buying older Downtown office buildings and converting them into rental apartments may attract other investors, his office gets daily calls from out-of-town investors who are interested in all of the area’s real estate.
“The problem is we just don’t have enough product to satisfy them,” he said.
Broujos said he has heard reports that Morgan Communities may be interested in purchasing local housing complexes owned by Nationwide Realty. Kevin Morgan would only say “we are interested in all (apartment) properties in Pittsburgh.”
The properties are the 270-unit Carson Street Commons in the South Side, the 235-unit residential complex in The Waterfront in Homestead, the 246-unit Docks in O’Hara, and the 359-unit Christopher Wren Apartments in Pine.
Morgan has been active in Pittsburgh.
Its area portfolio includes the 232-unit former Lincoln at North Shore in Pittsburgh, the 220-unit Park Place Apartments, South Park; 370-unit Club at North Hills, McCandless; 316-unit Waterford Nevillewood in Collier; and the 291-unit Westpointe Apartments, Robinson.
PMC’s Downtown acquisitions have been the Verizon Building, Stanwix Street; the Regional Enterprise Tower, Sixth Street; a six-story building at 908-10 Penn Ave., the 150-unit Penn-Garrison Apartments in the 900 block of Penn Avenue; and the former Reed Smith office building on Sixth Avenue. It has a signed sales agreement to purchase the Jackman Building, Downtown. The city’s candidate is to purchase the John Robin Civic Building at 200 Ross St.