Alabama Apartments Garner Interest from Multiple Buyers
- Sep 30, 2010
Mobile, Ala. —The Dobbins Group LLC recently closed on the 120-unit Lake Forest Apartments in Daphne, Ala. The distressed property is scheduled to undergo a $1 million renovation.
“The metro Mobile market is doing really well,” reports Bill Dobbins, president of the Birmingham, Ala.-based Dobbins Group. “As far as which particular sector is doing better in town, everyone is doing well right now. It’s kind of the rising tide that’s really taken everyone with it.”
Even the BP oil spill didn’t have as much of an impact as many people had anticipated, Dobbins tells MHN. “I was concerned about what it meant, but it didn’t have a negative impact on apartments or the economy—when you get away from the tourist areas.”
The Eastern Shore submarket of Mobile, where Lake Forest Apartments is located, is experiencing an overall occupancy rate of about 94 percent, Dobbins reports.
“It’s been a very good market and continues to do well. Job growth not been too bad,” which he attributes partly to the highly anticipated opening of the ThyssenKrupp steel plant, which is expected to add hundreds of jobs. He also says that the market is looking to see whether Airbus or Boeing wins a tanker contract for the U.S. Air Force. If Airbus is awarded the contract, Mobile, Ala. could see a tremendous job-growth boom.
While transaction volume is down, when assets do come to the market, there has been a flurry of activity. Lake Forest Apartments, for example, received 19 bids. And when A assets are for sale, Dobbins reports, it’s not just local buyers who are interested.
Birmingham, Ala. meanwhile, has hit bottom and is starting to rebound, reports Dobbins, though he notes, “Birmingham is a very stable market that hasn’t had the huge ups, [nor] the huge downs.”
Occupancies are up across the metro, and concessions have started to burn off. In addition, the lack of new construction, he notes, has helped the market. “The city is anti-development when it comes to apartments,” Dobbins tells MHN, “so when you make an investment, you don’t have to worry about new construction like you do in other towns.
“Birmingham is a market that doesn’t have huge growth or huge losses,” Dobbins adds. “It’s been fairly stable. Occupancies did dip, but never below 90 percent. We bottomed out right at 90, and now we’re working our way up.” Currently, the market is, on average, above 91 percent, with concessions between one-half month to one month of free rent.
One potential negative for the market could be if Regions Bank, which is headquartered in Birmingham, is acquired, which Dobbins says it is rumored to be a possibility, and would, of course, have a negative impact on the job market there.
The transaction market is seeing some movement in lower-tier assets, including both Class C properties and REOs, Dobbins reports, noting, “From a transaction standpoint, the market is shut down. The last trades were late-2008.” He adds, however, that the first Class A/B deal a 220-unit property, is coming to the market and has generated a lot of buyer interest. It is expected to achieve between a high-6 percent to low-7 percent cap rate.