Investment capital continues to pour into the apartment sector. Investors have an insatiable appetite for deals that have good cash-on-cash returns, as evidenced by what we’re experiencing in our office alone. Recently, ARA Dallas marketed four Class A communities in the Plano and Carrollton submarkets; all were 2000s-vintage product. We averaged 40 tours and 25 offers for each deal. This level is among the highest we’ve seen in years.
Even deals with unattractive debt and significant yield maintenance/defeasance are drawing a big crowd. On two recent deals, sellers are paying between $3 and $5 million in defeasance, but the buyers are chasing the cash-on-cash with debt in the 4 percent or sub 4 percent mark. Sellers are able to absorb significant penalty, pay off existing debt, and still maximize the value.
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