Texas Investment Firm on Rental Buying Spree
Bolstering economists’ claims that the local economy finally is coming back from a five-year slump, a Texas investment company said Tuesday that it has begun investing heavily in apartments in and around Orange County.
El Paso-based Security Capital Pacific Trust said it has acquired more than $100 million worth of Southern California apartments since May, including a 160-unit Tustin complex. The company also plans to construct 241 apartments on a site that it owns in Aliso Viejo.
The company, which said it believes the Southern California economy is rebounding and that new jobs will increase the demand for apartments in the region, also has opened an office in Irvine.
In all, Security Capital said it has acquired or agreed to buy more than 3,200 apartments in California in recent months, at a value of $287 million, and will build $208 million worth of multifamily units on land it already controls in the state.
The first project will be a 241-unit apartment complex in Aliso Viejo, scheduled to get underway early next year.
Other recent Security Capital acquisitions in Southern California include a 448-unit complex in San Diego, 296 units in Corona and a 736-unit complex in Ontario.
R. Scot Sellers, managing director of investments for Security Capital, said California’s strong employment growth and relatively expensive single-family home market will make apartments a good investment in coming years.
“We expect our overall investment in California to represent a significant part of [the company’s] portfolio by the end of 1997,” Sellers said.
The company presently owns 44,582 apartment units and is building or planning to build 20,000 more. It has 6,465 units, worth $416.8 million, in California.
High home prices provide a boost to the apartment market because they discourage many people from buying homes. In Orange County, the median selling price for homes rose 3.2% last month to $196,000.
“Everybody has been waiting for the economy to hit the bottom and then bounce back up, and it is doing that,” said apartment industry consultant Pamela Wooldridge, president of Research Network Ltd. in Laguna Hills.
The company’s annual survey of rents and occupancy levels in the county found that rents in the first quarter this year rose to the highest levels since the survey began in 1984. The 3% increase from last year brought the average apartment rent in the county to $802 per month, according to the survey of 100,000 apartments.
At the same time, Wooldridge found, developers had more apartment projects underway than at any time since the real estate recession began in 1990. And occupancy rates remained high--95%--despite a building boom that saw 1,759 apartment units built in the county last year. There now are more than 200,000 units in Orange County.
“Renting is a very palatable alternative to the high cost of housing in places like Orange County,” said Tyson Sayles, a rental market specialist with development and planning consultant Robert Charles Lesser & Co. in Los Angeles. As the economy comes back and rental prices start rising, owning apartments becomes a good investment strategy, he said.
