MULTIFAMILY MONDAY

Capital Consultants Realty Services prez Roland Freeman, part of the multifamily panel, says today's CRE crash differs from the RTC days of the '80s because now it's about protecting the institutions with the extend and pretend handling of the mortgages. He says this time we have lower interest rates  compared to the 9-10% back in the '80s. Back then, property owners couldn’t pay the interest, whereas today properties can stay current  on the loans as long as they don’t require an appraisal, he says. "I don’t think we’ll have that crescendo (of sales this time) because the receiverships are allowing them to finance the buildings they sell. They can deliver seller financing because if they foreclose someone has to provide new financing entirely for the provider or write a check."

PNC Real Estate Finance regional SVP Larry Sneathern says PNC is the largest Fannie Mae DUS lender in the country and No. 4 in Freddie Mac production. He’s seeing declining income in each of their markets; 70% loan to value with a little stronger debt service coverage; and 5.75  on average deals with phenomenal spreads. “If we can get back to realistic CMBS, it will add more competition and put pressure on the agencies to be a little more aggressive; they know they’re the only game in town,” he adds.

The bottom fell out of multifamily sales. In ‘07, there were 212 transactions (all time high); '08—105; '09—54 (with 70% in the second half of the year). But, it was far greater than other areas of country, says ARA Dallas managing broker Brian O’Boyle. In terms of transactions last year, Dallas (54) finished second only to Houston (77), and the state had more transactions than any other, he says. Brian anticipates fewer transactions this year, with the majority of deals in the Class C category.

MPF Research VP Greg Willett  says the Metroplex lost about 100k jobs and 3k apartment-renter households in '09. That was at the same time that 30k new apartments came online. “That is where the pain comes in,” Greg says. Good news: 1Q absorbed about 11k units. The new supply wave looks to have peaked in the 4Q; although DFW has more units under construction that almost anywhere else nationwide (9k more due this year). "We anticipate a big bump in occupancy in 2011 as we deliver virtually nothing,” he says. “A reasonably healthy job gain should stabilize rents and 2012 will be a big bump with rents going up with occupancy.”

No, it wasn’t a cameo by R. Lee Ermey, but UNT real estate prof John Baen telling these maggots (although they prefer commercial real estate professionals) that 2010 is the perfect storm offering opportunities for appraisers, CCIMs, and realtors. His take: cap rates are on the way up following interest rates; vacancies are going up; rents are going down; transaction numbers are going down; income, available financing, liquidity and equity are going down; and financial options are zero. He anticipates income taxes going up in 2010 and beyond, which isn’t good for real estate.