Joint Venture Adds to Seattle Portfolio Through Discounted Apartment Acquisition

Originally published: CoStar

A joint venture bought its second Seattle apartment complex in less than two months at a discount as investors capitalize on a sales slowdown that has shaken up property values.

Seattle-based Timberlane Partners’ acquisition fund and Stars REI, based in Chile, paid $55 million, or about $334,000 per unit, for the 166-unit Koi Apartments at 1139 NW Market St. in the Ballard neighborhood from CBRE Investment Management, Timberlane said in a statement. 

That’s about $2 million less than the $57 million, or about $343,373 per apartment, than the seller paid to acquire the six-story property in June 2014, CoStar data shows. 

In late December, the joint venture, acquired The Wilcox apartments at 2003 NW 57th St., also in Ballard, for just over $45 million from an affiliate of J.P. Morgan Global Alternatives — well below the $60.3 million that the J.P. Morgan affiliate spent on the property in June 2018. 

“We now own 298 high-quality apartment units in Ballard at an average price per unit of $337,000, which represents a 40% discount to replacement cost,” Timberlane Partners Managing Director Jon Hallgrimson said in a statement. 

Such discounts are becoming more common as rising borrowing costs have stifled apartment investment activity and spurred a pricing correction that has opened the door for such buyers as Timberlane, an alternative investment manager with a focus on multifamily real estate.

“We are beginning to see more examples of properties trading at lower prices than they had previously, and the two recent purchases in Ballard illustrate that trend,” said Elliott Krivenko, director of market analytics for CoStar in Seattle. “Some investors we have spoken with see this as an opportune time to invest in the market after rising debt costs over the past couple of years have shaken property values.”

Timberlane cited CoStar data that shows a 28% increase in market rents in Ballard, a popular urban neighborhood in northwestern Seattle, since the Koi property last sold a decade ago. The property was built in 2013 and is about 96% leased.

The venture isn’t the only one adding to its Seattle apartment portfolio. Chicago-headquartered Waterton made two apartment acquisitions in 2023, first paying $63.5 million for the 125-unit 128 on State apartments in downtown Kirkland, then shelling out $103 million for the 265-unit The Lakes in Bellevue from Prometheus Real Estate Group.