The Time is Right for Buying — and Selling and Refinancing — in the Multi-Family Sector
- Feb 08, 2012
Capital markets – especially in the hot multi-family sector – are coming around to the idea that there’s no time like right now, for buyers, sellers and finance firms. Within just the last few weeks, deal volume has accelerated for apartments: Walker & Dunlop L.L.C. found a $163.8 million refi package for Principal Management Partners. American Campus Communities purchased $208 million of student-housing communities. MetLife took a Chicago luxury high-rise off the hands of LYND Partners for $125 million.
“Sellers have held on to properties that might be struggling, thinking that the market would turn,” Jake Roberts, vice president of capital markets at Marcus & Millichap Capital Corp., told Commercial Property Executive. “At the back end of last year, we saw value-add deals coming around. (People) aren’t going to try and ride things out, since they realize prices aren’t getting better (this year).”
Buyers and finance firms, too, are in a good position.
“Right now, assets are priced right,” he continued. “I think that we’re going to see great opportunities for low-rate financing from life companies and other agencies.”
And the activity isn’t only focusing on core markets like New York City and Washginton, D.C. – it’s also percolated outward to cities that haven’t seen significant activity since the market’s 2007 downturn. According to a report by Marcus & Millichap Real Estate Investment Services Inc., cities such as Detroit are seeing motion in the multi-family markets. “Aided by tax incentives,” the firm wrote in its 2012 annual report, “property operators in Detroit will list performing assets, attracting yield-seeking buyers looking for outsize returns.”
Similarly, Salt Lake City will likely get some investor action this year. “The combination of improving operations, firming values and low interest rates will support increased listing activity,” M&M wrote. “encouraging longtime owners to sell and redeploy capital into stronger growth opportunities.”
But that’s not to say those core markets are out of the picture. But even in New York, activity is starting to stretch beyond the borders of Manhattan. “Opportunistic buyers will target undervalued properties in the outer boroughs,” M&M wrote. “Buyers with a penchant for risk will pay cash for underperforming buildings in (Brooklyn).”
Ryan Reid, executive vice president & national director of student housing for CBRE Capital Markets, felt the same.
“There is a lot of capital pent up,” he said. “Rent rolls are improving. You can get Fannie and Freddie financing. If you’re looking for a steady return in this market, multi-family will get you solid return on equity.”