Apartment Building Values Take a Drubbing

For many landlords, the rent is coming due.

Figures released Monday show that owners of Orange County apartment buildings suffered in 1992. Prices tumbled, few buildings were bought or sold, and vacancy rates edged upward.

The average sale price per unit in complexes of 20 or more apartments slipped to $58,227 last year in the county, down from $68,400 in 1991 and the recent peak of $76,558 in 1989, according to the survey by CB Commercial Real Estate Group in Anaheim.

That average might have been even lower if not for one transaction: the sale of a 450-unit luxury apartment building in the Anaheim Hills. The Sycamore Canyon apartments were bought by Irvine Ranch Water District for $34 million, or $75,555 a unit. “That was the biggest deal in several years,” said Brad Turek, a CB apartment specialist who helped compile the survey results.

Sycamore Canyon was among 28 apartment buildings of at least 20 units each that were sold last year. That compared to 27 transactions in 1991. Still, it was a far cry from the 111 deals closed in 1988.

Vacancy rates ranged from 7% to 9%, Turek said, compared to about 6% in 1991.

In spite of the lackluster economy and layoffs of workers, the apartment vacancy rate is not rising rapidly, Turek said. As unemployed workers leave to seek jobs elsewhere, apartments are being filled by new arrivals, often families rather than couples and single people.

Edward Masterson, past president of the Apartment Assn. of Orange County, said units that rent at lower rates were actually harder hit by vacancies last year than were higher-priced units.

“This recession has affected the lower-paying jobs, and that has emptied out some properties,” said Masterson, who heads California Income Properties. The company, based in Lake Forest, owns about 200 units, most in Orange County.

As a result, landlords are “taking another look at rental rates and, if necessary, they have adjusted,” Masterson said.

Multiple-Family Dwelling Sales

The number of transactions in which Orange County apartment buildings changed hands leveled off in 1992 after four years of declines. But the average value of units continued to fall. Sales of buildings with 20 or more units:

Average price Year Transactions per unit 1988 111 $72,381 1989 70 76,558 1990 74 76,292 1991 27 68,400 1992 28 58,227

Source: CB Commercial Real Estate Group Inc.