Fall 2012 issue of Horizons

REAL ESTATE

vacancies and surging demand are driving investors to grab deals as they come to market. Yet, most investors are focusing on properties with lower and middle rent price points rather than throwing monies at luxury units. Equity pricing for affordable multifamily housing investments has also rebounded, boasting mid-to-upper ninety cents per dollar of credit on the coasts. And, in some cases, deals have closed with pricing over a dollar per dollar of credit earned. Most often, this has been driven by financial institution investors looking to satisfy their community reinvestment appetite with quality properties. Fueled by investor need and demand for investment, sales activity for 2011 was equally strong, with transactions growing approximately 30% from 2010 to 2011. Garden style properties have contributed to most of the volume. And, as expected, pricing per unit continues to rise as cap rates have steadily fallen since 2010. Of course, now analysts are questioning just how low cap rates can drop. Most believe the trend will not last. However, given the current industry trends involving rental growth, falling vacancies, rising demand and overall investor need, the environment points to low cap rates into the near future. Conclusion 2011’s robust industry performance has left market analysts, apartment owners and other stakeholders optimistic for 2012 performance. With sustained rent increases, lower vacancies and rising permits, this year is expected to experience continued success and end on an even higher note than the previous year. The continued recession felt in the single family housing market as well as the current shift in the rent versus buy perspective remain impactful on the industry’s recovery.

rental demand, has lured financial institutions to place monies in investments that can provide a “safety net” during times of economic uncertainty. Likewise, the multifamily market has also performed better than expected in regards to the timing of selling off distressed assets – another attractive feature to many lending institutions. In keeping with some of the trends noted in the latter half of 2010, Fannie Mae, Freddie Mac and the Federal Housing Administration concentrated lending efforts on preservation projects during 2011, offering low all-in rates. Similarly, Freddie Mac has enticed apartment owners and developers with bond credit enhancements, which has helped to spark interest and opportunity in the otherwise previously diminished area of tax-exempt bond financing. Likewise, the same characteristics that are attracting lenders back into the multifamily market are making a comparable impact on investors. As mentioned above, factors such as improved occupancies, decreased

With rising demand and a sustained need for multifamily housing on the table,

page 34 | horizons Fall 2012