Real estate investment trust JLL Income Property Trust has paid $81.8 million for a property in the Seattle suburb of Bothell that it considers a safe bet in case of a slowing economy.
The trust, an independently operated affiliate of Chicago brokerage Jones Lang LaSalle, bought a 21-year-old apartment complex called Stonemeadow Farms, which has 280 units spread over 19 buildings on a 29-acre tract. It paid the owner, represented by Chicago-based asset management firm Baring, a per-unit price of $292,000, according to CoStar.
Executives at JLL Income Property Trust said in a statement that they believe the complex is in a good location with a desirable public school district, near major employers, and though the city has a high median income, home prices are too high for many residents, which could provide the trust with a steady and solid stream of tenants looking to rent.
“We expect investments of this type to perform better in a late-cycle environment – which is one of the drivers of our suburban apartment strategy focused on properties in locations with barriers," said Allan Swaringen, President and chief executive of JLL Income Property Trust, in a statement. "These types of investments generally deliver stable cash flow, lower volatility and more resilience than other market locations.“
The U.S. economic expansion is coming up on a record 10th year of growth that has many speculating about how long that growth can last. Some, like JLL Income Property Trust, are beginning to put in place cautious plans that could help them withstand a potential slowing or decline in the coming years.
The sale price puts the complex on the higher end of a market that has seen robust activity, with only four properties trading for more than $100 million in the last two years and top per unit prices reaching to almost $400,000 a flat. It is the seventh largest sale in Bothell over the last two years when ranked by total dollars paid and price per unit, according to CoStar sales comps data.
This appears to be the only Seattle area property in the trust's apartment portfolio, which contains a total of 3,100 units and makes up 32 percent of its real estate holdings' total value, according to the firm's website.
Stonemeadow Farms' vacancy rate is 7.5 percent, according to CoStar's most recent data, a bit higher than Bothell's multifamily market at large, which has a 4.7 percent vacancy rate overall. Neither the buyer nor the seller responded to inquiries about the property.
However, Bothell is in the midst of a prolonged apartment building boom, which has periodically driven significant spikes in vacancy rates in the area, said CoStar Market Analyst Jared Kadry. More than 1,000 units were added to market from 2015 to 2018, and about 1,000 more are in the pipeline.
"Due to a strong job market, developers have inundated Bothell/Kenmore with high-end apartments over the past several years," Kadry wrote. "The glut of new units has resulted in vacancy volatility as many communities are still in lease-up. The rate of new construction continues, and a sizable pipeline in the near term adds supply pressures."
