Category Archives: Multifamily

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 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.

Question of the Day – Why should anyone sign a fee agreement if they don’t even know whether–or not–they are interested in a property?

Amazingly enough, this question surfaces a lot in the course of the  business week.

The answer comes in the form of a question:

Why should opportunities be brought to buyers that are not willing to establish business agreements upfront, which is the only fair and honorable thing to do.

There are two sides to every story.  It all starts with the establishment of mutual trust, respect, and professional courtesy. There is a written process in place to accomplish this. We warmly welcome all honorable multifamily investors that respect this process. All others should not waste our time.

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.

Developers Are Increasingly Pursuing Adaptive Reuse Opportunities

“’Experienced developers that have pursued ground up in the past are looking now at alternative ways to decrease risk, and tax credits can make development more attractive,’ says Jeffrey Rogers, president and COO of Integra Realty Resources. Including historic, low-income or New Market tax credits in a project’s capital stack makes the entire project seem less risky and more viable, Rogers says.”

via Developers Are Increasingly Pursuing Adaptive Reuse Opportunities.

The Effects of Low-Trust Culture in the Multifamily Marketplace


Trustworthiness creates a high-trust culture

I have read some very inspirational books over the years. A few of my favorites are the 7 Habits of Highly Effective People by Stephen R. Covey, the Speed of Trust by Stephen MR Covey, and the Power Principle by Lee Blaine just to name a few. After many years of reading these books, a new paradigm has taken hold and it became a lens from which certain observations became crystal clear to me. One of my most recent observations is the apparent low trust culture that seems pervasive in the multifamily marketplace where one can spend a significant amount of time getting past time-wasters and getting to the people that work honorably.

This low-trust culture adversely affects the vitality of business, and the continuity of meaningful communication. Operating from within a low-trust culture drains energy and wastes a lot of time for everyone involved. It slows the attainment of effective results, and it cripples entrepreneurial agility. Even in the instantaneous nature of the digital world, the pace of business will slow to a crawl unless people can develop trust and mutual respect in order to create an effective working relationship. It is the single most important thing to have in any working relationship because–without mutual trust and respect–communication becomes trifling, awkward, difficult, or non-existent, “The serious practical impact of the economics of trust that is in many relationships, in many interactions, we are paying a low-trust tax right off the top–and we don’t even know it” (Stephen MR Covey, The Speed of Trust: the One Thing that Changes Everything, 2008, p. 17). Covey (2008) suggests it would be better to build smart trust in order to consciously create a trust dividend instead, “I also suggest that, just as the tax created by low trust is real, measurable, and extremely high, so is the dividends of high trust are also real, quantifiable, and incredibly high” (p. 19).

Establishing Trustworthiness is the Key

Establishing trust requires honesty and  diligence.  Trust is not a “pie-in-the-sky” phenomenon. It is real, but it requires first achieving a sense of mutual understanding along with a degree of professional courtesy. The old adage says that we should become the change that we see in the world, and I wholeheartedly agree. I think when people work to demonstrate trustworthiness upfront, it goes a long way to reaching goals more effectively. The road ahead may be challenging, but the results will be well worth the price paid with effort, perseverance, and determination to achieve the best possible outcome for all.

Mutual Benefit is the Goal

Mutual benefit is the goal, but it cannot happen without honest communication. Without it, getting to the heart of the matter is next to impossible. The whole point is to build understanding and trust. There are many out there that do not believe that win/win relationships can really exist, “Most people have been deeply scripted in the Win/Lose mentality since birth” (Stephen R. Covey, The 7 Habits of Highly Effective People, 1989, p. 207). In order to transcend this, Covey talks about making a “paradigm shift,” (p. 23) in the way we perceive the world around us. It starts with one person, and it grows with every person that commits to the idea of transcending the level of dysfunctional interpersonal behavior that plagues the multifamily market.

Principle-Centered Power is the Way

In his book, The Power Principle: Influence with Honor, Blaine Lee (1997) explained three paths to power Coercive Power or “Controlling others through fear,” “Utility Power,” or “Let’s make a deal,” and “Principle-Centered Honor,” ( p. 15). Of the three, principle-centered power is the THE ideal form of power in which to operate from personally and professionally. The nature of business has a tendency to use “Utility Power,” where the association is good as long as someone has something that is of interest or of value to another, but the experience with principle-centered power is entirely different, “When you operate with principle-centered power, it invites others to feel, ‘I honor and respect what you are and what you’re about. Because of that, I voluntarily commit my life, my efforts, my resources to partner with you in achieving worthwhile things” (Blaine Lee, The Power Principle: Influence with Honor, p. 119).

How the Multifamily Market is Benefitting from the Decline of the Single Family Market


I have been a Realtor since 1996. One thing I have noticed in my time in business is that—in general– the demand for rental housing goes up when the demand for home ownership goes down. The current economic climate in the housing market stems from a number of issues, but the most obvious is the increased difficulty for buyers to get loans. Loans are increasingly tougher to get because of stricter documentation requirements. This explains why the numbers in the housing market are indicating a growing trend towards renting as opposed to buying.

A recent article reported the increased development activity of multifamily properties (Mortgage Banking 2011), the article attributed the increase of multifamily development activities to the weakness in the single-family market(p. 92-93) and the increased availability of funds in the capital markets. Therefore, the worst single-family housing market in recent history is causing the best multifamily market to occur.  The demand for rentals continues to  grow stronger as more people begin to give up on the idea of owning. The National Apartment Association confirmed this trend when they reported revenue gains of 5.8 percent in 2011 for the multifamily industry.

In my local market of Kitsap County, things are tough for single-family home sales. The pool of qualified buyers has thinned out so much over the last few years, and it continues to shrink. However, multifamily  development activity has increased noticeably in the county within the past few years.


Multifamily capitalizes on weak housing markets. (2011). Mortgage Banking, 71(10), 92-93.

The Off-Market Multifamily Frenzy vs. Timeless Real Estate Investment Principles



This was my contribution to today’s class discussion in real estate finance:

Yes, it seems that only the most well-funded investment groups are taking full advantage of the current market. There are still a lot of investors sitting on the sidelines, but at some point, they will all need to realize that it still boils down to the numbers and how properties perform over the life of the holding period. Too much frenzy about “off-market” opportunities, and not enough energy spent on  considering real potential deals that are out there in this inhospitable economic environment.

I think a distressed deal is a distressed deal whether the deal is on or off the market. Even non-distressed deals can become distressed in this economic climate. Why? Because, sellers of non-distressed assets are going to have to compete with the tremendous volume of distressed assets that have–and have not yet–hit the market. The environment is bad for many sellers, especially the ones that cannot refinance for whatever reason.

Whether on the market, or off the market. All deals are competing for the same pool of investors. I think there is too much focus on finding off-market deals, and not enough energy going into considering the factors surrounding a real potential opportunity; for example, considering the fundamental basics of net operating income as it relates to an after-tax “cash-on-cash” return (the only real thing that really matters in the end is the actual cash flow that makes it into the bank). Taking the current economy into consideration, a savvy investment group knows how to step into a deal to make smart and well-informed decisions in order to achieve record revenue figures.