Source, Philadelphia Business Journal, Natalie Kostelni
UDR Inc. has acquired Park Square, a 313-unit apartment complex that opened last year in King of Prussia, for $108.5 million, or for $346,600 a unit.
While not reaching the per square foot prices that some Center City properties are getting, the sale price for Park Square is an encouraging sign for those worried the suburbs — particularly King of Prussia — were getting overbuilt with apartments. That may yet still be the case, but strong sales prices indicate that the units being built are getting filled, rents are being paid and properties are stabilizing.
There are 9,314 apartment units in various stages of construction or planning throughout the Philadelphia suburbs, according to a first quarter Berkadia report. Of those, two projects — the Smith at 580 S. Goddard Blvd. and Skye 750 at 750 Moore Road — are in King of Prussia. Between them, they have 568 units that are in the lease-up phase. Other projects planned for King of Prussia include Hanover Village (390 units) and two projects on Renaissance Boulevard (nearly 600 units), according to the report.
King of Prussia isn’t alone seeing an abundance of new apartments. Malvern, Exton, Collegeville, Cherry Hill, N.J., and Marlton, N.J., are among the suburban communities where developers have either started or are planning new multifamily construction. In Kennett Square, High Real Estate Group recently broke ground on a $30 million apartment development called the Flats at Kennett. The 175-unit project is being built on 14.4 acres at 603 Millers Hill Rd. It will consist of three buildings totaling 230,000 square feet.
“We saw a specific gap in demand where there was no new apartment supply built in Kennett Square in recent years. We saw an opportunity and growing demand for an upscale project,” said Brad Mowbray of High Associates Ltd. “We believe this will cater to growing demand in the millennial market and those downsizing.”
Rents will run from $1,400 to $2,000 and the Flats at Kennet is expected to be completed in the fall of 2020.
While Center City and other urban centers were the first the see new apartment development, the suburbs have ramped up in recent years. It comes as there is a bit of a dropoff of new apartment developments in urban areas amid worries of oversupply.
The shift in how people view apartment living started in the recession. That’s when homeowners with underwater mortgages struggled and re-calibrated how homeownership was viewed. In addition, people began to flock to urban centers. As a result, apartment living has been increasingly embraced and developers have seized on that trend.
King of Prussia has been a hotbed of apartment activity. Another apartment complex in the Village at Valley Forge is on the market and will test whether the high per-square-foot sale price at Park Square is a blip. Indigo 301, a 363-unit apartment complex, was put up for sale in May and is being marketed by HFF. Last year, Hanover Valley Forge, a 339-unit property that was one of the first apartment complexes to be built in the mixed-use community, traded for $75.3 million, or $221,238 a unit.
Park Square is the first apartment property that UDR (NYSE: UDR) has acquired in the Philadelphia suburbs. The project was developed by CornerstoneTracy of Villanova and Bentley Homes of West Chester. It is located at 751 Vandenburg Rd. and the community had average monthly revenue per occupied unit of $1,897, according to UDR. Rents range from $1,971 a unit to $2,971 a unit.
The Highlands Ranch, Colo., company, which owns apartments across the United States, is also involved in two Philadelphia multifamily properties. It owns Domus, a 290-unit apartment complex at 3411 Chestnut St. in University City. It also made a $51.4 million financial commitment to the development of 1300 Fairmount.