News
Must-Have Multifamily
March 21, 2011
| Shake it as much as you want, but this market's going to be pretty hard to mess up over the next 12 to 24 months, according to the expert developers, owners, and lenders who spoke to an audience of300 at our second annual Bisnow Multifamily Summit on Friday at the Metropolitan Club. | |
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| Exhibit A: RMK Management president Tony Rossi's new Parc Huron, which opened last summer, is about to see cash flow. It wouldn't have come together at any other time because Tony bought the deal from a distressed condo developer, he says. Part of the increase in apartment occupancy has been due to cooler amenity packages: a spa, pool, party room, business center, and outdoor grill area have drawn young renters. Occupancy is up across the board. But it will be a while before we see development gets back to the 'burbs, where lenders aren't as confident yet. | |
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| AMLI CEO Greg Mutz says the resurgence in multifamily is being driven by a confluence of factors: First, there's no new development. Even the fast-growing Atlanta market saw just 700 units built. Second, homeownership has dropped by about 3.5%among Americans, and each percentage represents the creation of1.3 million new rental households. And third, most of the new jobs being created are going to 20 to 34-year-olds, who are much more likely to rent than their parents. Greg's also seen the flipping of some condo buildings back to apartments, which will create a trickle of new supply over the next year. | |
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| Waterton Associates' David Schwartz saw a 4% rent growth across his Chicago portfolio last year. That includes Presidential Towers, which had been undergoing a renovation that was put on hold for the recession; now it's started up again. Now that he can improve the1,600 units in Waterton's portfolio, David expects to see more rent growth. He's also trying to get some of the buildings LEED certified, but he's doesn't know if people will actually pay more for that. Waterton has bought some fractured condo projects, which can go well if there's a plan to have the buyers sell back their units. | |
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| The difference in investor interest for multifamily in each neighborhood is profound, says Habitat Company CEO Mark Segal. Apartments listed in Streeterville are getting 30 to 40 interested bidders while those in farther out neighborhoods (like Hyde Park) are getting just a handful. Mark says properties in the 'hoods could be good values because they're often just as stable as the downtown. He's also seeing an increased demand for affordable housing in urban areas. | |
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| Walker & Dunlop's loan origination guru Joel Kaplan says lots of his borrowers are chasing after a limited supply of product. The firm originated $3.2B in loans last year, and this year many of Joel's clients are looking for Class-B and C as well as value-add assets, plus the higher quality of affordable and mixed-income housing has been getting a lot of attention from his borrowers (it doesn't look likeCabrini-Green anymore). He also credits the GSEs for getting multifamily through the recession unscathed. | |
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| Speaking of which, Freddie Mac has a solid portfolio of loans nationwide, the GSE's John Luka told the audience. Only about adozen of their assets have become REOs and there have been very few delinquencies so far. Freddie Mac has dropped the pricing on its five-year loans by 35 bps, John says. And what's more, he's not worried yet about the unwinding of the GSEs because it probably won't occur until at least the next administration, and government officials recognize the need for GSE multifamily lending. Besides, John says, it's not really healthy for the entities to be responsible for 80% of multifamily lending anyway. | |
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| As always, thanks to our sponsor and moderator Reznick Group'sGeorge Klenovich for keeping our panel interesting and on track! |
