INSIDE THE DEAL: A ‘Grade A’ Helps Sell Louisiana Apartment Asset

By Keat Foong, Executive EditorLafayette, La.—The sale of Grand Pointe Apartments provides an example of the kinds of transactions that can take place in a down market—in which a strong market and high quality asset can help facilitate any deal.  Apartment Realty Advisors (ARA) brokered the sale of the Class A luxury apartment community based here by the Mississippi-based regional developer of the property. On behalf of ARA’s Secondary Markets team based in Austin, Texas, Matt Heininger represented the developer.  The buyer was an Omaha-based national investment corporation which owns and manages apartments throughout central U.S. “Despite the current difficult economic environment, Grand Pointe’ss excellent location, quality construction and the strengths of the Lafayette market attracted a number of aggressive bidders during the marketing process,” says Heininger, who is vice president, Secondary Markets team, in ARA’s Austin, Texas office. Cap rates have increased significantly, by at least 100 to 150 basis points, in the market, says Heininger. And he says there are more buyers sitting on the sidelines. “There are certainly fewer seriously interested buyers than what I have seen in the past,” he acknowledges, saying that there are maybe about half the number of aggressive bidders compared to a year ago. Neverthless, “fortunately, the south Louisiana economy is still relatively strong compared to the rest of the country,” Heininger says. “Buyers and bidders are bullish on Lafayette’s economy,” which is supported by oil, gas and medical industries. Plus, the University of Louisiana at Lafayette is located in the city.  Heininger anticipates the buyer will be holding the property for seven to 10 years. The buyer was able to obtain an 80 percent Fannie Mae loan with an interest rate in the low 6 percent range, he says. “They were able to obtain the loan because of a good combination of strong market and buyer and a stable brand new asset.”“In addition to pricing, the buyer was selected based on a history of performance on previous transactions. Grand Pointe’s closing points to the fact that there are still markets, like Lafayette, with strong fundamentals and buyers who are willing and able to transact.”