New apartment construction keeps building.

OCCUPANCY IN THE PULASKI County apartment market took a slight dip to 93.9 percent during 2003. The number indicates the market is holding its own despite an influx of new units and continued construction.

"The market is stable and solid," said Jerry Webster, president of Little Rock's Webster Corp. "It's borderline strong. You hate to use the word strong because it sometimes gives the wrong connotation.

"But all the construction that is happening now is a result of a simple formula: strong market plus good interest rates equals new construction."

ERC Development Group of Barling (Sebastian County) has three new apartment projects totaling 556 units in the construction pipeline in Pulaski County.

Framing work is under way on ERC's 172-unit ChapelRidge project in North Little Rock, that city's first new multifamily development since 1985. The project near the southeast corner of Highway 161 and McCain Place should open during the second or third quarter of 2005.

ERC recently settled a lawsuit with the city of Sherwood to clear the way for getting a building permit and got the paperwork rolling on tax-exempt bond financing for a proposed 168-unit project on Brockington Road.

The company is hoping to break ground by December on the nine-acre development, estimated to weigh in at $10.7 million.

ERC has completed dirt work moving toward a third quarter 2005 opening for its HighlandPointe development in west Little Rock. The 216-unit upscale project is similar in design to its HighlandPointe Apartments, which came on line in Maumelle earlier this year.

"We were very pleased with the lease up," said John Clayton, chief operating officer of ERC Development Group. "As of Aug. 29, we're 50 percent leased."

Besides HighlandPointe, three other new apartment projects are under construction in west Little Rock--Stonebridge at the Ranch, 260 units; The Reserve at Chenal Valley, 248 units; and The Cedars at Wellington Lake, 128 units.

Ted Bailey III, partner in Multifamily Group LLC of Little Rock, expects occupancy in northwest Little Rock will soften with the arrival of these four projects.

"The Cantrell corridor is the hottest market in terms of job growth and apartments," Bailey said. "We are hoping this will help keep occupancy from getting too soft in this submarket."

Jerry Webster believes new construction will tail off while the market absorbs the new units that are in place or on the way. To protect against tenant migration, apartment owners will have to stay on the ball.

"People are going to have to spend money to keep the property maintained or suffer the consequences," Webster said. "I think acquisition-rehabs are going to be popular. They don't have to be expensive rehabs either; these can be cosmetic."

Reports of a new class-A apartment project in downtown Little Rock with 100 units or so are making the rounds, and the would-be deal could surface by year's end.

"There continues to be a lot of talk about apartments in the downtown market," said Richard Cheek, partner in Multifamily Group LLC. "But the only projects remain to be loft apartments, which is a different creature."

The sales front is shaping up for another bout of transactions that will likely close by December, according to Webster.

"It's going to be an active year," he said. "We're winding down, but you're going to see some large, impressive sales between now and the end of the year."

The biggest apartment transaction in Pulaski County during 2003 was The Grove at Pleasant Ridge, a showstopper at $73,100 per unit.

Vintage Pleasant Valley LLC, led by David Alexander and Alvin Child Jr., bought the 225-unit at 11901 Pleasant Ridge Road for $16.4 million. The 24.3-acre development was purchased from Schaedle Worthington Hyde Properties Ltd. of Atlanta.

"That property today would sell at a significantly higher price than it sold for a year ago," Webster said. "New construction has just gone out of sight."

Seven other apartment projects changed hands around Pulaski County during 2003 in sales that topped the $1 million mark.

Pleasant Woods Apartment Associates LLC of Pennsylvania bought its namesake 220-unit project at 11800 Pleasant Ridge Road for $8 million. The 18.3-acre development in west Little Rock was acquired from Pleasant Woods/DEC Ltd. of Columbus, Ohio.

Chateau West Apartments LLC, led by William Tull, purchased its namesake 141-unit project at 6310 Asher Ave. for $4 million. The limited liability company bought the 7.4-acre development in Little Rock from Winn Revocable Management Trust, led by James and Juanita Winn.

Stonewall Homes LLC, led by John Kitterman, acquired the 124-unit Stonewall Apartments complex at 1010 N. First St. for $3.7 million. The limited liability company purchased the seven-acre development in Jacksonville from Stonewall Apartments LLC, led by Ralph Bozeman.

Carl Schultz and Cynthia Knoerr bought the 104-unit Protho Manor Apartments complex at 1909 Highway 161 for $2.5 million. They acquired the 7.2-acre development in North Little Rock from Myrtle Henry.

Donald Marshall Sr. and his wife, Helen, purchased the 109-unit Windamere Townhouses and Apartments at 5701 Dreher Lane for $2.5 million. The 4.48-acre development in southwest Little Rock was bought from the Donald K. Kirk Revocable Trust.

Lynnwood Apartments LLC, led by Wade Arnold, acquired its namesake 59-unit complex at 8860 Thomas Drive for nearly $1.5 million. The 2.4-acre development in Sherwood was purchased from Arnold & Co., led by Tom Arnold.

Donald and Melba Marshall bought 122 units of the former Lew & Crenshaw project (9115-9205 Lew Drive and 5216-5422 Crenshaw Drive) in southwest Little Rock for $1 million. The Marshalls renamed the 4.5-acre development Meadowcrest Apartments after purchasing it from Zato Investments Ltd., led by Michael Rushin.

Apartment Market Index

First Quarter 2004
                     Total Units               Avg. Unit   Avg. Rent
                        Surveyed   Occupancy   Size (SF)   (monthly)

Units Built
Before 1980               10,202       92.7%         848        $541
Northwest LR               2,818       93.2%         873        $576
North Little Rock          2,434       92.4%         825        $532
Central LR                 2,409       93.0%         873        $598
Southwest LR               1,136       93.3%         799        $437
Jacksonville                 649       95.4%         774        $392
West Central LR              638       87.7%         908        $569
Sherwood                     118       90.0%         780        $424

Units Built
in 1980s                   6,347       94.8%         832        $581
Northwest LR               3,398       96.2%         841        $628
Central LR                   725       86.6%         777        $600
West Central LR              624       92.8%         808        $486
Southwest LR                 272       99.6%         775        $539
North Little Rock            365       92.6%         887        $563
Jacksonville                 364       97.7%         684        $412
Sherwood                     357      100.0%         924        $504
Maumelle                     242       90.4%       1,010        $541

Units Built
After 1990                 3,131       95.3%         904        $685
Northwest LR               1,053       94.0%         997        $823
Southwest LR                 876       96.6%         822        $561
Sherwood                     578      100.0%         819        $534
Downtown LR                  234       89.1%         915        $751
Central LR                   222       96.0%         917        $894
Maumelle                     168       88.6%       1,001        $610
Overall LR Area           19,680       93.8%         852        $577

First Quarter 2004               * Annualized
                     Avg. Rent         Change
                        per SF        in Rent

Units Built
Before 1980          63.8 cents          2.8%
Northwest LR         66.0 cents          2.8%
North Little Rock    64.5 cents          1.5%
Central LR           68.5 cents          1.3%
Southwest LR         54.7 cents          3.7%
Jacksonville         50.6 cents          1.5%
West Central LR      62.7 cents         11.6%
Sherwood             54.4 cents          0.0%

Units Built
in 1980s             69.8 cents          1.8%
Northwest LR         74.7 cents          3.9%
Central LR           77.2 cents         -4.6%
West Central LR      60.1 cents          0.0%
Southwest LR         69.5 cents          0.0%
North Little Rock    63.5 cents          0.0%
Jacksonville         50.2 cents          3.9%
Sherwood             54.5 cents          0.0%
Maumelle             53.6 cents          0.0%

Units Built
After 1990           75.8 cents         -0.1%
Northwest LR         82.5 cents          1.0%
Southwest LR         68.2 cents          0.0%
Sherwood             65.2 cents          0.0%
Downtown LR          82.1 cents          8.7%
Central LR           97.5 cents          0.4%
Maumelle             60.9 cents        -17.6%
Overall LR Area      67.6 cents          0.2%

* Change in average rent from from Dec.  31, 2003, to March 31, 2004

Source: The Multifamily Group LLC of Little Rock

Pulaski County Apartment Occupancy 1985-2003

 1985    1986    1987    1988    1989    1990    1991    1992    1993

89.0%   86.0%   82.0%   86.8%   91.4%   92.5%   93.4%   94.4%   95.7%

 1994    1995    1996   1997 *    1998    1999    2000    2001    2002

95.1%   95.0%   93.9%    92.9%   91.9%   92.3%   94.4%   93.7%   94.1%

 2003

93.9%

* 1997 data extrapolated from trend 1996-1998.

Source: 1999 Pulaski County Apartment Survey and The Multifamily Group,
Little Rock.