1st big apartment complex in years to be built

Lopez's HSL Properties paid Diamond Ventures $4.6 million for a 13.3-acre tract on the southeast corner of West River Road and North La Cholla Boulevard in late August, said Omar Mireles, executive vice president of HSL Properties.

The complex is expected to be "amenity rich" and serve as a good complement to an office and retail development across the street, Mireles said. Construction is slated to begin in about nine months, with completion likely in 2009, he said.

"I think it feeds right into the new urbanism concept, with the live, work, play right in that area," Mireles said.

He said rents have not been set, but the complex will be "high-end but still affordable."

Few apartment buildings have been built in Tucson in recent years because rents have been too low to justify relatively high development costs, said Terry Feinberg, president of the Arizona Multihousing Association, a trade association for rental-property owners.

"People aren't going to build the building unless they can get a return on a dollar," he said.

Just two apartment buildings, totaling 219 units, were built in Tucson in 2006, said Phoenix property investment specialist Pete teKampe, citing research firm RealData.

As commercial credit restrictions tighten, developers are becoming even more selective about projects they choose to pursue, he said. Luxury apartment buildings make more sense to build because extra amenities can cost little, but the units can command much higher rents than basic apartments, Feinberg said.

Apartment owners could benefit from the recent real estate downturn, as lenders tighten standards and would-be buyers find it more difficult to qualify for mortgages, Mireles said. But the market slowdown might be a double-edged sword for landlords, as unsold single-family homes become rentals.

"I don't think we've seen the whole thing flesh out just yet," he said.