Sales of apartment properties in Connecticut are off to a strong start in 2005. The Briarwood Hills complex in North Haven (above) was recently sold for $13.5 million.

Last year’s big sales and high prices made it a lucrative year for apartment sales in Connecticut. But although 2004 raised the bar high, activity in the beginning of this year is suggesting that 2005 might be just as successful.

“Although last year was what we called a banner year, this year so far has been on par,” said Steve Witten of Marcus & Millichap Investment Real Estate Services of New Haven. “I would say it was probably comparable to what we saw last year.”

Witten and his partner, Victor Nolletti, were recently the sole brokers in the $13.5 million sale of an apartment complex in North Haven known as Briarwood Hills. The price per unit – about $77,000 each for the 176 one-bedroom units and single-bedroom lofts – was precedent-setting for New Haven County, according to Witten.

The average price per unit in New Haven County during the first quarter of 2005 was $44,350, according to statistics from Marcus & Millichap.

With that sale, the second quarter has started out strong. And according to statistics from Marcus & Millichap, this year’s first quarter was also strong.

“As both institutional and private owners re-evaluate their regional holdings, we expect 2005 to be on par or exceed 2004 in total sales volume and deal velocity,” according to the company’s statement about the first quarter statistics. “The combination of low interest rates and buyer demand (low yield expectations) should push per-square-foot and per-unit values roughly 5 percent to 7 percent ahead of the previous year.”

Connecticut saw some good closings in the first quarter of the year, Witten said. The biggest change was the decrease in cap rates and yield criteria.

“The market’s a little stronger in that respect,” he said.

Since interest rates remain low, demand is still high. Lenders remain competitive and are being aggressive with their lending rates, Witten said.

The sales activity has been spread out all over the state, he added. There were significant sales at the beginning of the year in Hartford and New Haven counties, and Witten said he expects Fairfield County to pick up soon.

‘A Great Time to Sell’

In fact, during the first quarter, nearly $100 million in apartment sales closed in Connecticut. During all of 2004, the total of the sales that closed in the state was about $284 million. Hartford and New Haven counties led the pack in the first quarter of 2005, with $46 million in sales closing in Hartford County and $31 million closing in New Haven County. Fairfield County saw fewer sales, but a much higher per-unit price than the other counties in the first quarter. Fourteen units were sold in Fairfield County during the first quarter for $2.9 million – a per-unit price of $207,150, and a price of $243 per square foot.

In Litchfield County, brokers sold 172 units during the first quarter for a total of $11.5 million. New London County enjoyed $6.3 million in sales, while Tolland County saw about $1.6 million. The average price per unit for the first quarter of 2005 was $60,892.

Those numbers are strong when looking at whole-year numbers from 2004. Last year, Hartford County saw apartment sales totaling $112 million, and New Haven County saw sales totaling $129 million. Tolland County had the third-highest amount of sales, with $19 million, and was followed by Fairfield and Tolland counties, with $16 million and $7 million in sales, respectively. The average price per unit in 2004 was $57,554.

Witten and Nolletti recently closed several large sales. They sold 510 units in Manchester for $39 million, 498 units in Hamden for $48 million, 680 units in Hartford for $30.4 million and 172 units in Litchfield for $11.5 million.

Last year, several sales of large portfolios led to an 88 percent jump in total units traded from the year before. The number rose from 2,798 in 2003 to 5,282 in 2004. It is typical for one large portfolio to trade in a year, but 2004 was different, with three or four large complexes trading hands.

Witten and Nolletti closed a couple of those large sales in late December, including the sale of a 23-building portfolio near downtown Hartford and the largest multifamily sale of the year.

The transactions – the Hartford sale and a $48 million sale in Hamden – were some of the biggest of the year. The Hartford transaction encompassed 680 units in the 23 buildings, which are spread just outside of the city’s downtown, many near the corner of Farmington and Sisson avenues. New York-based real estate firm Houlihan-Parnes bought the properties, which are known as the Whitehouse Portfolio, for $30.4 million from the family that had owned the buildings, according to Marcus & Millichap.

The Hamden property, called the Apple Hill Apartments, encompasses 498 apartments and sold for $48 million.

Another 242-unit portfolio was sold earlier in the year. The three-property portfolio included an 88-unit building in Meriden, a 48-unit building in Bristol and a 106-unit property in Manchester.

Apartment buildings continue to generate good returns for investors, Witten said.

“Cap rates have decreased by as much as 50 to 150 basis points in the past 12 months and lack of new supply will keep yield expectations competitive,” according to a summary of the first quarter from Marcus & Millichap. “It is certainly a great time to sell and, based upon solid economics and real numbers, a good time to buy. With nominal construction starts, excellent base industries, historically high occupancy and healthy rental growth, Connecticut remains at the top of many buyers’ lists of preferred markets for multifamily investments.”

Witten and Nolletti’s most recent deal – the Briarwood Hills complex – commanded a relatively large per-unit price because of its location and residents.

“It’s an interesting property,” Witten said.

Briarwood Hills is a contemporary property with eclectic touches such as exposed brick and attracts mostly young professionals who work in New Haven – which is a 10-minute drive away – or in nearby Hartford. The complex is located at 100 State St. in North Haven, off Exit 10 on Interstate 91. It has amenities like a clubhouse with an in-ground pool, some apartments with lofts, washer/dryers, dishwashers and separately metered utilities. The kitchens are fully equipped and the units have central air conditioning, spiral staircases, sun decks, garden terraces and walk-in closets. The complex is set on about nine acres. The 2-story buildings, 10 in all, total 128,559 square feet, with units ranging from 588 to 875 square feet.

The per-unit value of the sale was high for relatively small units in New Haven County, Witten said.

“It’s based upon the strength of the market,” he said.

Many young professionals in the area are looking for something that is “more than the standard four walls,” and the complex’s design allows for that, Witten said.

The buyer, Briarwood Connecticut LLC, which was represented by Dana Friedman of Milford-based Harlow Adams and Friedman, plans to add other amenities and services. The seller was Connecticut Briarwood Investors.

Witten said he expects the apartment market in Connecticut to stay strong throughout 2005. At the beginning of the year, he noted, he expected interest rates to rise substantially, but that hasn’t happened yet. He said he still expects it, but added that investment in multifamily homes continues to generate superior returns.