Multifamily

By Taylor Williams Decreased acquisition activity across virtually all asset classes is among the most visible impacts that COVID-19 has had on commercial real estate, but capital markets professionals say there’s reason to believe deal volume will rebound sharply toward the end of the year. According to data from Real Capital Analytics (RCA), the total sales volume of commercial properties in the country was approximately $44.7 billion during the second quarter. This figure represents a staggering year-over-year decrease of 68 percent and the lowest quarterly total in more than a decade. In terms of income streams, some asset classes are faring much better than others. Social distancing mandates and stay-at-home orders, while disastrous for retail and hotel properties, have elevated demand for e-commerce, as well as manufacturing of essential goods and services. The latter trend ensures that for many industrial owners, rent collection is not a major concern. But current and future economic uncertainty are causing investors across the board to pause new acquisitions. “We saw a significant decline in demand for acquisition financing when the pandemic began,” says Jeff Erxleben, executive vice president and regional managing director of NorthMarq’s Dallas office. “There were major unknown factors coming in all …

By Brad Frisby, Associate, NAI Rio Grande Valley The McAllen-Edinburg-Mission MSA’s multifamily market has posted positive rent growth for the first half of 2020, despite the outbreak of COVID-19 causing nationwide job losses and impacting landlords’ ability to push rents during much of that time. The combined effect of a stimulus package for renters and pandemic legislation that bans evicting residents who cannot pay due to COVID-19-related job losses has largely kept occupancy rates steady throughout the first half of the year. Occupancy rates for Class B and C product rose to the mid-90s, but absorption at Class A properties has taken a small dip.    As construction — and economic activity in general — resumes at a greater pace in the second half of the year, we expect new deliveries to come on line and bring the marketwide occupancy rate down slightly. As of May, the McAllen area had added about 500 new apartments to its supply, with an additional 700 or so set to be delivered by year’s end.    The North McAllen, Edinburg and  Weslaco submarkets will receive the bulk of new deliveries this year.  Over half of the new units delivered will be through the Texas …

By Sam Greenblatt, CEO, Electra Capital Today, a growing number of risk-averse financial institutions are pulling back from the multifamily rental market, leaving owners and investors struggling to complete their transactions. Fortunately, however, private firms are stepping into the gap with alternative sources of debt and equity capital. As the COVID-19 pandemic disrupted the national economy this spring, banks tightened their standards on all types of loans, according to a recent Federal Reserve survey of senior loan officers. Nearly half the surveyed lenders reported that they had tightened standards on multifamily loans in the first quarter. That pullback can have a potentially crippling impact on multifamily transactions. Let’s say an investor seeking to purchase a $50 million multifamily asset has raised $12.5 million (25 percent) in equity with a bank loan due to provide $37.5 million (75 percent). But before the deal could close, the bank implements a tighter 60 percent loan-to-value (LTV) ratio limiting its senior financing to $30 million. Now, the investor or transaction sponsor needs to come up with an additional $7.5 million on short notice or the deal will fall apart. This is where alternative private capital firms can provide flexible, short-term financing solutions, including bridge …

As a multifamily investment sales brokerage firm, Greysteel has transacted close to 2,000 units in El Paso over the last 12 months. To say the El Paso multifamily market has been hot would be an understatement.  But with a sudden pandemic causing economic chaos, jobs are at risk and multifamily owners are facing ever-increasing pressure. First, let’s talk about how El Paso has recently performed. Demand for multifamily product in El Paso has been particularly strong lately, and we’ve been able to bring new in-state and out-of-state investors into the market at cap rates never before seen in El Paso. Many of these investors are surprised to learn that El Paso is the sixth-largest metropolitan area in Texas and the 18th-largest city in the country.  As cap rates on multifamily properties have compressed across the United States, El Paso has offered a safe haven for higher yields that can be elusive in major markets with high levels of competition. El Paso also has a diverse public/private sector that barely felt the pain of the 2008 recession — cumulative job losses totaled less than 3 percent of the total employment base. Job growth has expanded steadily, and employment was approximately 13 …

Multifamily developers across the country know that these are unprecedented and uncertain times for nearly everyone due to COVID-19. Houstonians making up our workforce, which many consider “the essential class,” include professionals like teachers, police officers, nurses and firefighters who invest in other peoples’ betterment every day. These are the people who are working day in and day out to provide us with various fundamental needs during this time of mandated quarantine. Many of these individuals are tenants of workforce housing properties, and to the relief of developers, are most essential to the world right now. However, not all jobs can be kept, and with over 3 million people in the United States having lost their jobs in just a week’s time, necessary processes and procedures about how to work with residents who might be in a financial bind due to COVID-19 have become a requirement. In early March, developers including our firm began to work with both the National Apartment Association and the Houston Apartment Association for recommended guidelines to effectively help our tenants who need it most. Additionally, several landlords came together to better understand what other complexes are doing on the ground to best serve our residents. …

The U.S. economy’s continued expansion, combined with the migration of people from high-tax states in the Northeast and California, bodes well for multifamily real estate investment in metros across the Southeast and Texas. Many cities in the so-called “Sun Belt” will continue to experience strong demand for apartments thanks to the low cost of living and new jobs stemming from corporate investment across the region. The Fort Worth market has been a beneficiary of all of these dynamics, and there are a plethora of compelling reasons why multifamily investors are eager to invest in the Panther City. Population Boom Fort Worth’s population has seen considerable expansion over the past decade, serving as a catalyst for Texas to become a leader in this key fundamental. U.S. Census Bureau data shows that from 2010 to 2018, Texas led the nation in population growth with over 3.5 million new residents, 1 million of which moved to the DFW area between 2010 and 2019. Just this past year alone, Texas continued to be a national leader in population growth, with Tarrant County coming in at No. 3 for total new out-of-state residents, according to the Texas Association of Realtors®. In terms of how this …