December 28, 2011

Local firm adds another apartment to portfolio

Photo courtesy of Cadence Capital [enlarge]

An entity of Seattle real estate firm Cadence Capital purchased the 22-unit Winston Apartments in the city's Capitol Hill neighborhood for $4.3 million.

The seller is a limited liability company that lists Anne Michelson as the member.

The building at 1023 E. Pike St. has small one-bedroom and studio apartments and about 8,000 square feet of retail space. Three-quarters of that space is rented to retail tenants. The rest is an apartment, which Cadence intends to convert to commercial space appropriate for a bar.

The existing retail and residential spaces are fully occupied, and the cap rate on the deal is 6.7 percent, according to Cadence Capital.

[Editor's note: This story has been updated to provide occupancy information and the cap rate.]

This is eleventh apartment building Cadence has purchased since 2008 when childhood friends Chris Garvin and Barrett Johnston founded the redevelopment, management and construction company. It is the first purchase that includes retail.

The firm's portfolio is mostly made up of older, well-located Seattle buildings that have anywhere from nine to 53 units. In total it owns about 220 units with an overall value of approximately $45 million.

The firm does cosmetic upgrades to the apartments and then raises rents. At the Winston Apartments, it plans to paint, install new windows, upgrade the plumbing and do light electrical work, and then raise rents 20 cents per square foot, to $2.10.

So far this year, Cadence has purchased five buildings, and plans to buy more in 2012, Garvin said.

He said prices are still reasonable, but are going up. “It's certainly more competitive than it was a year ago. I think people are catching on that rents are starting to grow.”

He said Capitol Hill is attractive to renters. “They want walkability. They want access to public transportation, and they want to live where they hang out.”

Michelson purchased the Winston Apartments for $1.9 million in 1999. King County appraises it at $2.3 million.

Brian Platt of Paragon Real Estate Advisors represented Cadence in the purchase. Cathy Jeney, also with Paragon, represented Michelson.

Cadence raises money from investors and Garvin and Johnston invest their own cash. The firm also does single-family remodels and light commercial construction.

Garvin previously worked for Gibraltar, a Seattle commercial real estate company, and Johnston worked for the Bellevue general contractor Foushee & Associates.