Tuesday, April 26, 2011
This is despite the low transaction volume during the first quarter of 2011, which was surprisingly similar to the first quarter of last year.
However, the large number of apartment communities listed for sale during the first quarter of this year, combined with the increased availability of capital to finance new acquisitions, should result in a significantly higher transaction volume during the remainder of 2011.
A total of three multifamily sales were tracked during the first quarter of 2011 with a combined value of $77,077,000.
The volume during that same period last year was $82,494,000. Thirty-seven total sales were tracked in 2010, which equated to $1.2 billion in transaction volume. Bulk condominium sales represented approximately one-third of those transactions last year.
2010 was a transitional year for the multifamily investment market. The looming recession and low transaction volume of 2009 dampened expectations for transactions at the beginning of 2010.
However, throughout the year the market transformed into a white hot investment market reminiscent of the years prior to the market downturn. This was most likely due to the abundance of capital for multifamily assets combined with increasing occupancy rates and reduced concessions associated with a recovering apartment market.
Interesting to note is the percentage of distressed asset sales, which were anticipated to be higher. In 2010, distressed sales and bulk condo sales, combined, only accounted for 40% of the transaction volume.
Non-distressed “traditional” apartment transactions dominated the multifamily market during 2010. This is in direct contrast to nearly all other real estate sectors where distressed sales dominated completed transactions.
Capitalization rates reflected the high demand for multifamily assets in 2010. Reported cap rates on trailing income for all apartment categories ranged from 3.75% to 9.75% with a median cap rate of 6.25%.
The low cap rates for multifamily assets were reportedly driven by “lease-up” opportunities and anticipated above average rent growth over the next several years. The average price per unit of $83,167 was reminiscent of 2002 price levels.
HIGHLIGHTED TRANSACTION—FIRST QUARTER 2011
The Residences at Bayview (middle left photo), a 225-unit luxury midrise rental community, is the highlighted transaction of the quarter. According to County records, the property was purchased in January of 2011 by a publically traded REIT, Equity Residential (EQR), for $45,118,000 or $200,524 per unit.
The original developer was the seller in the transaction, RAM Development. The Residences at Bayview was completed in 2003 and enjoys direct frontage on Federal Highway between Atlantic and Cypress Creek Boulevard within the City of Pompano Beach, Florida. The property benefits from limited competition of class “A” rentals in the submarket.
For more information on Franklin Street, please see the company’s website at http://www.franklinstreetfinancial.com/