Category Archives: Apartment Rentals

Multifamily Lenders Scramble For Business | Commercial Observer

By Michael Stoler, Commercial Observer

(MARCH 28, 2014) The residential rental asset class is one of the most sought-after investments by purchasers of commercial real estate. Investors from around the world, including private equity funds, real estate investment trusts and established long-time owners of real estate, all want to own this asset class, especially if the property is located in New York City.

The purchasers and the owners of this property class have been fortunate that the majority of commercial and savings banks, as well as Fannie Mae, Freddie Mac and Wall Street firms providing CMBS financing, are all very interested in financing rental apartments.

via Multifamily Lenders Scramble For Business | Commercial Observer.

IREM : Institute of Real Estate Management | ABOUT IREM |

 

Information for Property Owners and Investors Building Value Worldwide

“As a savvy real estate owner or investor, you value results; IREM-credentialed members deliver by: effectively operating properties—of any type—resulting in improved value adapting quickly to achieve your evolving goals anticipating and taking advantage of market conditions applying the body of knowledge, education and resources of their global professional organization to bring leading-edge solutions to your property a commitment to adhere to an enforced code of ethics which is an added value when trusting someone with your investments. Learn more about IREM and its members.The Institute of Real Estate Management IREM® is an international community of real estate managers across all property types dedicated to ethical business practices and maximizing the value of investment real estate. An affiliate of the National Association of Realtors®, IREM has been a trusted source for knowledge, advocacy and networking for the real estate management community for more than 77 years.”

via IREM : Institute of Real Estate Management | ABOUT IREM |.

CORE VS. SUB-MARKETS: How Large Multifamily Investors are Leaving Money on the Table for the Smaller Investors

The Great Sub-Market Debate

Experienced real estate investors know that the investment value of a property is predetermined by the cash flows generated from the property. These cash flows are both incoming and outgoing. If the demographics surrounding the property are strong, this helps to reduce vacancies, thus improving the rate of uninterrupted cash flows during the holding period.

These are basic fundamental real estate principles. They are real, and they are timeless. It makes no difference if a property sits in a core market, or a sub-market. If the market is vibrant with strong employment, demographics, and the numbers make sense, then you know you have a deal worth considering. Oddly enough, many REITS shun properties located in sub-markets without even a second thought.

A Brief and Generic Case Study:

What if you found a property that could generate enough cash flows to produce a 34% return on investment within five years?

Let’s take a closer look at this scenario:

Here are the cash flow projections for this particular property:

The CASH FLOWS:

Initial Equity (Year 0)    ($3,400,000.00)
Year 1    $405,404.00
Year 2    $477,993.00
Year 3    $549,149.00
Year 4    $625,329.00
Year 5    $706,891.00

Resale Value    $23,843,379.00

PV @ 15%    $22,621,466.24
Less Mortgage Bal    ($12,552,132.00)

Net Present Value    $10,069,334.24

Return on Investment of $3,400,000.00:    34%

Big Buyer Group Think: Location over Profitability

For all accounts and purposes, this looks like a profitable scenario. However, many institutional investors–including REITs–would not even look at this deal because it is located within a sub-market. I understand the perspective that asks the question, “Why should we pay a 6% cap rate for a property in a sub-market when we can purchase property at a 6% cap rate in a core market?” However, I would like to point something very important to all the smaller real estate investors out there. Leaving money on the table without consideration is a big mistake.

When smaller real estate investors begin to recognize the money that has been left on the table by the larger institutional buyers. It is indeed a “blue ocean” of opportunity, because the big companies are too inflexible and too rigid to recognize opportunity outside of their normal view of the way things are. In May of 2011, Mortgage Banking Magazine quoted Alan George–the CIO of apartment REIT Equity Residential, “…there were so little class-A assets. There were so few nationwide in core markets that it was a completely useless endeavor,” George said. “There are distressed assets, there still are in some of these tertiary markets, but who wants to buy those?”

I beg to differ by answering the question, “who would want to buy golden opportunities in strong submarkets?” Why, smart and experienced real estate investors would, because they know to look at the numbers and surrounding economic factors of the area. A strong market is a strong market whether it is a core or a sub-market.

To the smaller real estate multifamily investor, I say, there is a blue ocean waiting to be captured. Use the “big-buyer group think” syndrome to your advantage.

Energy Saving Tips for Multifamily building owners and tenants | MultifamilyG.com

MultiFamilyG is a website dedicated to educating multifamily building managers, owners and investors about practical green technologies that can reduce operating costs and increase the property’s allure to residents. Energy efficiency, green certified design, and waste reduction are hot consumer topics and can also save you money if done properly. Whether you are considering the construction of a new building or trying to retrofit an old one, MultifamilyG provides you with the tools and information you need to reduce energy costs and green your property. Use our free online green self-check, learn about solar power, fuel cells, and energy reduction techniques, and request free advice from energy experts. Go green and get the “G-factor” to get ahead!

via Energy Saving Tips for Multifamily building owners and tenants | MultifamilyG.com.

Strong Shifts in Multifamily, Retail Real Estate Sectors

The multifamily sector is poised to take advantage of positive fundamentals as demographics continue to favor renting over buying, according to Edward Kobel, president and chief operating officer of the Tampa-based DeBartolo Development.

Among the company’s investment sectors, which include multifamily, limited service hotels, anchored retail and a “special situations” category that primarily consists of land, Kobel said in a video interview with REIT.com at the Akerman U.S. Real Estate Summit this month in Miami that the highest returns have been in the multifamily sector.

via Strong Shifts in Multifamily, Retail Real Estate Sectors.

HomePath.com – For Investors – Structured Sales

Fannie Mae is implementing a structured sales program involving significant sales of real estate assets in the form of either pool sales or joint venture transactions.

Any structured sales under this program are expected to be significantly larger than our existing pool sales described on our “For Investors” page. Joint venture transactions are expected to allow qualified investors to purchase a controlling equity interest in a newly formed investment vehicle created to hold multiple properties in one transaction. The qualified investor would be responsible for the management and servicing of the assets, and would be an equity partner with Fannie Mae. Pools may be national, regional, or geographically focused, subject to post-closing asset management strategies and restrictions, and consist of vacant and / or occupied (including rented) properties. Sales of controlling equity interests will be limited to qualified investors.

via HomePath.com – For Investors – Structured Sales.

New Multifamily Housing Construction at 20-Year Low

Plunge in Apartment Construction

“NAREIT’s analysis shows that construction of multifamily units plunged to a nearly 20-year low during the recession, creating a supply shortfall. According to the analysis, between 2008 and 2010, construction of multifamily units fell as much as 70 percent from its trend growth rate over the past decade.

Although multifamily construction starts have increased since the beginning of 2010, the number of units under construction remains at nearly 60 percent below its long-term average.

‘Squeezing off the construction pipeline for four years, on its own, has produced a shortfall of more than 500,000 apartment units relative to the number that would be needed just to satisfy the demand produced by normal population growth over that period,’ Schnure said.

‘However, there is nothing normal about the demand scenario for apartment units that will come into play as the economy continues to recover, accelerating the job growth we are beginning to see now,’ he said.

via New Multifamily Housing Construction at 20-Year Low.

Recovery of Commercial Property Fueled by Apartments: Mortgages – Bloomberg

Positive news…

Apartment vacancy rates, now at a decade-low of 5.2 percent, never fell below 8 percent, even during the lowest point of the commercial property rout, according to data from Reis Inc. The office vacancy rate was 17.3 percent in the fourth quarter, while vacancies at shopping centers average 11 percent in the fourth quarter, unchanged from the previous three quarters.

“It’s a lot easier to hang your hat on something that’s experiencing good fundamentals where values are being supported than if somebody handed you a retail building that sits 60 or 70 percent occupied,” said Ryan Severino, senior economist at Reis.

via Recovery of Commercial Property Fueled by Apartments: Mortgages – Bloomberg.