ATL Knee Deep in Capital: Here's Why.
That flood of capital has become a boon for ATL developers and real estate investors in the US. That's among the reasons we're excited to host our Atlanta Capital Markets event on Sept. 17 at the St. Regis in Buckhead, starting 7:30am.
“The United States in general and commercial real estate specifically continue to enjoy a level of preference among investors that has not been seen in the last 50 years,” says Ackerman & Co's Kris Miller. Debt and equity both are available “to as great a degree as they've ever been in my 30 years in the business.” For developers and investors alike, money is coming from every direction—institutional, family and foreign capital. Why? America has become the perceived beacon of safety in today's economic turmoil: China's slowdown, euro problems, third-world countries struggling under the burden of debt. “There are just way fewer choices about where to invest than there used to be,” Kris says. “And the reason for that is all the other places are screwed up.”
There's data to back that up, too. The Association of Foreign Investors in Real Estate in its 2015 data study revealed that 70% of its members view the US as the most stable and secure country to invest in real estate, blowing away other Western countries such as Germany, Canada and the UK. And while Atlanta ranks low as a target for foreign money compared with major US gateway cities like NYC and San Francisco, its prestige has spiked in 2014 to nearly 5% of AFIRE's foreign investor membership, up from near 0% just five years ago. That's on par with Boston and even beating out Chicago and Seattle as a money destination. And foreign investors expect to outlay even more capital into US commercial real estate this year, according to AFIRE.
As for multifamily, capital and debt is both more and less prevalent, says RADCO Cos' Norman Radow, another of our panelists. The biggest impact is that Fannie Mae and Freddie Mac tapped themselves out of their $30B investment bucket for market rate apartments in the first half of 2015. While both organizations still have a $30B kitty for affordable housing, in today's “unprecedented” rental rate increases, the standard to reach that has been nearly insurmountable, Norman says. "Affordable" is defined as apartment rents that account for 25% of an average renter's income. But today, Norman says he's seeing people stretching to as much as half their income to afford living in apartments, especially the highly coveted Millennials, who—on average—only earn $37k/year in Atlanta. “[No developer] can qualify because no one can meet that definition,” he says.
Still, money from the private world—institutional and individual investors—are filling in a lot of the Fannie and Freddie gap, Norman says. Even with his usual target investment—suburban 1970s and 1980s vintage apartments—Norman says he's finding a lot of groups willing to invest. Case in point: By October, RADCO should command 14,000 apartment units in its portfolio, up from 12,000 now. It currently has Andover at East Cobb apartments and The Crossing at McDonough Apartment Homes under contract. And he only sees the appetite for apartments—and even apartment operators—increasing from big investors such as Blackstone. Norman says huge funds have $150B in capital (multiplied to $600B leveraged) to shell out in 2015. “How are you going to buy $600B in multifamily? That's historic. It's so ginormous, once they figure out how they can deploy that capital, there's going to be more movement in our business than we've ever seen,” he says. “I don't know how that's going to end, but something really interesting is happening.”
Join Kris and Norman as well as the rest of our all-star capital lineup, including North American Properties' Tim Perry (here), Paces Properties' Merritt Lancaster, State Bank & Trust's Blake Snyder and SunTrust Bank's Joe Pella at our Atlanta Capital Markets event, 7:30am, Thursday, Sept. 17, at the St. Regis in Buckhead. Sign up here!
