The Cambridge Apartments, a 158-unit complex in New Haven, recently was purchased for $15.3 million. Apartment complex sales in the Greater New Haven area are becoming increasingly common.

Real estate investors would do well to keep their eyes on Greater New Haven over the next several years. The city’s ever-evolving downtown continues to change as developers convert old industrial and office space into new – sometimes luxury – apartments. Meanwhile, apartment complexes elsewhere in the area are hitting the market at a fairly high rate and selling quickly.

City officials and private developers have collaborated over the past 10 years or so to change downtown New Haven from an economically depressed area to a clean and vital place with diverse shops, restaurants and nightlife. Another ongoing plan intended to revitalize the city calls for more apartments downtown and those changes continue with two large conversions and many small ones.

“There seems to be pretty keen interest in folks living downtown,” said Kevin J. Smith, a commercial broker with North Haven-based H. Pearce Real Estate Co.

Work on the former Strauss Adler underwear factory downtown wrapped up in early 2003 and now 146 apartments occupy the space, according to New Haven Public Information Officer Roland Lemar.

A second downtown conversion – the renovation of the former Southern New England Telephone headquarters into 112 apartments at 727 Church St., called “The Eli” – is due to be finished soon, Lemar said, and is almost fully leased. Many other downtown buildings are having their second, third and fourth floors converted from Class B office space to apartments, Lemar said.

Smith attributed the hot market for apartment complexes to those changes.

“I think a lot of it has to do with conversions downtown,” he said. “There seems to be no end to these conversions.”

‘An Atypical Amount’

In other parts of New Haven and in its suburbs, existing apartment complexes have been hitting the market quickly and selling in about two weeks. Steve Witten and Victor Nolletti of Marcus & Millichap have handled many of those.

The team has brokered several sales over the past few months and most of them have sold in about two weeks, Witten said. There are many reasons why such apartments come up for sale, but a contributing factor in the past few months could be concern that the market for multifamily housing is due for a correction or some softening, Witten said.

In other cases, owners of apartment complexes are selling because they have owned the property for a long time and can sell for a tidy profit. Some families who own complexes sell because they don’t want the responsibility of managing the apartments anymore, Witten said.

Witten said he expects the number of sales he and Nolletti complete in 2004 to surpass the numbers of the past several years. But the team constantly keeps busy.

“There’s always business in this market,” he said.

With the possibility of a correction or softening, owners of apartment complexes will continue putting their properties up for sale at a high rate, Witten expects.

“I believe we’ll see an atypical amount of property come to market in the next couple of years,” he said.

But the buyers of complexes will still find that managing the apartments is profitable, Witten said. Although there are more complexes coming up for sale, that doesn’t change the way the apartments themselves are brought to market or the capitalization rates of the apartments, he noted.

The Marcus & Millichap duo’s most recent sale was that of a 158-unit complex in the Westville section of New Haven. Witten – who is also the senior director of the firm’s National Multi Housing Group – and Nolletti brokered the sale of the Cambridge Apartments at 200-234 Fountain St. and 1275-1269 Forest Road for $15.3 million, according to information provided by Witten. Esplanade New Haven sold the property to Tarragon Realty Investors of New York City.

The Cambridge Apartments complex consists of two 7-story, mid-rise, poured-concrete towers, a freestanding rental office/residents and an 11,000-square-foot activity or community room. There are also two detached, 2-story brick buildings that total 18 units and six detached single-family and multifamily dwellings. The complex is on a 4.66-acre lot.

There are 23 385-square-foot studio units; 20 one-bedroom units that are between 550 and 683 square feet; 111 two-bedroom units between 750 and 1,200 square feet; three three-bedroom, two-bathroom units that total between 1,250 and 2,400 square feet; and two four-bedroom, two-bathroom units that total 2,300 square feet.

Witten and Nolletti also recently brokered the sale of a 73-unit property in nearby Wallingford for $3.9 million. Rescue Funding Inc. sold the building to 665 Foxon Road LLC. The property is a converted mill building called Parker Place Condominiums, which was built around 1900 and converted in 1988. There are a total of 120 units in the building, but 73 were sold.

“With convenient access to Interstate 91 and the Merritt Parkway, the property is in a supply-constrained market with significant barriers to entry and new construction,” Witten wrote in a prepared statement.

The units include studios and one- and two-bedroom units.

Witten and Nolletti also brokered the sale of a 104-unit complex in eastern New Haven about three weeks ago for $4.4 million. The Fairway Gardens Apartments are located at 66 Eastern St., near Exit 8 off Interstate 91. The complex was built around 1960 and is made up of townhouse-style apartments in 22 detached-frame buildings. It is on 14.35 acres near the Alling Memorial Golf Course. There are 69 two-bedroom units of 850 square feet and 35 three-bedroom units of 1,050 square feet.