🔒Ever Higher: $160M sale of 360 State apartments sets new standard for New Haven multifamily market

Its windows glittering high above the interstates, the 360 State apartment building has shaped New Haven’s skyline since 2010.

With its 500 high-end units and initial use of a hydrogen fuel-cell power source, the building’s rise marked the start of downtown’s transformation into a luxury rental cluster.

Now the 32-story landmark has notched another milestone: Selling for $160 million in a record-breaking transaction in November. MEPT Chapel Street LLC, or Multi-Employer Property Trust, sold the building on Nov. 7 to New York-based Ansonia State Street LLC, an affiliate of Beachwold Residential LLC.

Beachwold, which owns about 6,000 units in the state, had just closed big deals in Norwalk and Stamford when 360 State started being “quietly marketed” in 2022, said CEO Gideon Friedman.

Beachwold had been looking at building from scratch in New Haven's hot market but saw 360 State as an opportunity to upgrade an existing property at a much lower cost per unit, he added.

“We've been operating in and around New Haven for over 20 years at this point and so we've known about 360 since it was built,” Friedman said. His company, “always just regarded it as a great iconic building for New Haven.”

Real estate experts and city officials agree that the price tag for 360 State was eye-popping but in line with a rental market that continued to see strong demand throughout 2022.

“New Haven is one of the most attractive markets in the state of Connecticut for investment in general and for apartment buildings,” said Brad Balletto, co-founder and senior vice president for investments at Northeast Private Client Group.

Balletto has worked on several major apartment building deals in the New Haven area in the past year, including last month’s $34.6 million sale of six multifamily properties with 145 units on Howe Street and Edgewood Avenue in New Haven.

New Haven’s biotech and higher ed-fueled market is increasingly drawing comparisons to another Ivy college town up the coast, Balletto said.

“I've even heard investors agree to this characterization to call it a mini-Cambridge,” he said, adding, “Cambridge is one of the strongest real estate markets in the country.”

The 360 State deal is notable primarily because of the large number of units involved, Balletto said. The purchase price works out to about $320,000 per unit, not inordinately high for a recently built luxury building, he said.

“Outside of Stamford you're not going to find many properties of this size, and additionally, it's newer construction, a luxury property that can command high rents,” Balletto said.

Rents stay high as volume slows

Although brokers say demand has slowed a bit from last year’s hyperactive market, interest remains strong for luxury apartments in the city’s core, and rents are still at historic highs, according to Carol Lopez Horsford, owner and broker at New Haven-based Farnam Realty Group.

“There was much more demand last fall compared to this fall, but I think that's also because we were just coming out of the real shortage of the pandemic,” Horsford said. “In September, October, November of (2021), there wasn’t a single apartment in New Haven.”

Horsford said she is seeing fewer would-be renters, but apartments at the new 575 Whitney — a 24-unit redeveloped former church — were still 75% leased within a month of coming on the market. Rents for one-bedrooms at the complex in the hot East Rock neighborhood start at $1,995 a month.

Horsford credits the market’s ongoing strength to both New Haven's growth and larger social trends in the wake of the COVID-19 pandemic.

“The rental demand has remained high and I think improved over COVID because people want to move to the cities,” Horsford said. “They don't want to be stuck out in their big house so they sell and want to move downtown.”

That trend is ongoing, she said, as Baby Boomers downsize and look for more manageable living spaces.

In the past, “you only lived in New Haven if you had to be here,” Horsford said. “And now I think it’s a fun, hip, vibrant place to be.”

Growth at Yale and other universities, Yale New Haven Health and the city’s biotech sector are underpinning the market for both apartment complex sales and new development as more people move to the city, said New Haven Economic Development Administrator Michael Piscitelli.

“Those are underpinnings that open up opportunities,” Piscitelli said, speaking at the ground-breaking for a new 398-unit apartment complex at 201 Munson St. “These are all part of the formula. We're at a population that we haven't seen since the mid-1970s.”

Even with a strong market, New Haven is unlikely to see more high-rises like 360 State, said Deputy Economic Development Director Steve Fontana. Most new complexes in the city top out at five stories due to the high price of the steel to build taller. Even so, some taller buildings have been proposed for the corner of State and George and at the site of the demolished New Haven Coliseum.

“They're coming, but they cost a lot more and you have to project that much more demand,” Fontana said. “So it's a higher reward, a higher risk.”

360 State revamp

To keep competitive in a tightening market for luxury rentals, new 360 State owner Friedman is planning at least $10 million in renovations and upgrades, including roller shades and upgraded lighting for the apartments.

“We’re going to do a big overhaul of the amenity spaces and the common spaces," Friedman said, in addition to adding co-working areas and updating the lobby.

Developer Bruce Becker designed and built 360 State on the site of the old Shartenberg store, seeking to attract both Yale affiliates and empty-nesters. The granite countertops and commanding views have drawn tenants including current Yale New Haven Health CEO Christopher O’Connor.

As part of Becker’s commitment to environmentally friendly design, the complex was built with a hydrogen fuel cell, which hasn’t been in operation for several years, Friedman said. He plans to spend $2.5 million to replace the original unit with a new system from Doosan in South Windsor, which makes its products in the state.

“We're gonna install a new fuel cell, which will result in very significant energy savings for the building,” Friedman said.

Part of the building’s appeal was its uniqueness in New Haven, Friedman said. Now the high-rise overlooks a cluster of new multifamily projects that have boosted street life and traffic at its main ground-floor retail tenant, Elm City Market.

Due to the city’s vibrancy, Friedman didn’t rule out future purchases in New Haven.

“We look at everything that comes on the market in New Haven,” Friedman said. “New Haven has great prospects, long term.”