Financial Market Update: M-F Sector Sees Rent Growth

As the financial markets and economy continue to struggle, the multi-family real estate sector remains relatively healthy. According to Marcus & Millichap Real Estate Investment Services, rental growth for multi-family properties nationwide grew 3 percent in 2008, and rental growth is expected to increase by about 1.5 percent this year. Occupancies nationwide stood at about 94 percent last month, and Marcus & Millichap is predicting a drop in that figure of only about 1 percent in 2009. None of that makes multi-family finance deals easy, however. “There’s no such thing as a routine deal any more, not in the current climate,” Todd Goulet, senior vice president of KeyBank Real Estate Capital, told CPN. But there are deals. Key closed recently, for instance, on a $40.2 million Freddie Mac loan for Essex Property Trust Inc. to partly refinance debt for renovations made on Pathways at Bixby Village, a 296-unit multi-family property in Long Beach, Calif. “Each deal involves a lot of meticulous due diligence,” Goulet continued. “Still, it’s also not the case that banks have quit lending to refinance income-generating properties. Provided the fundamentals of the property are rock-solid–and such properties are still out there–those deals are going to be done.”Meanwhile, Wall Street investors seemed curiously optimistic on Wednesday, driving the Dow Jones Industrial Average up 200.72 points, or 2.46 percent, with the S&P 500 gaining 3.36 percent and the Nasdaq gaining 3.55 percent. Even European markets gained some ground. What perked up the equities markets? The Federal Reserve maintained a key short-term interest rate just shy of zero, but that was expected. Or perhaps it was more talk of a “bad bank,” also known as an “aggregator bank,” that would be designed to serve as a government-sponsored entity to round up all those toxic assets–bum mortgage-backed securities tranches and ne’er-do-well collateralized debt obligations–believed to be weighing down banks. Reportedly the Obama administration is leaning toward the establishment of such a bank with the second helping of TARP money. Even Wells Fargo shares were up 27.5 percent, despite the news that in their most recent quarters, the bank lost $2.55 billion on its own and the newly acquired Wachovia Corp. lost a whopping $13.72 billion. Investors took that news in stride, since Wells did not cut its quarterly dividend, and said that it doesn’t need more money from the federal government. On the other hand, the International Monetary Fund wasn’t so optimistic about the big picture. The very big picture: the IMF cut its forecast for growth in the world economy to a minuscule 0.5 percent, down from a November estimate of 2.2 percent. Developed countries’ economies will contract; previously burgeoning economies in the developing world (China, India and others) will quit their breakneck expansions; and those poorer countries dependent on commodities exports will be hosed, though that’s not quite the terminology that international high-finance experts use. Starbucks, which is already vacating an assortment of retail locations this year, announced that its going to close more stores, about 300, as well as lay off 6,700 employees. The move comes after the coffee chain’s revenues fell from venti to merely tall, or from 28 cents a share a year ago to 9 cents a share in its first fiscal quarter this year. A good many consumers presumably have decided that barista-made hot beverages in fact qualify as expendable luxury items.