The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
The competitive nature of multi-family right now is seeing plenty of opportunity for investors or sponsors to purchase multi-family properties before they’re leased up. While before these investors might wait for 80% leased up properties, they’re now pouncing early on projects still in early development or those only leased 50-60%. Low rates and natural market competition are making multi-family projects more highly sought after than ever.
Richard Wilson: Is there an opportunity for sponsors or investment funds to purchase multi-family projects before they’re leased up? Because I know you guys are helping to develop many of these projects, are you still seeing there’s some meat on the bone for people to be pursuing that strategy? Or is that so competitive now you’re essentially paying for almost that stabilized price for a brand new product coming out on the market that’s not fully leased up yet?
David Greer: I think you’re seeing that, that’s a great observation. A lot of these groups are very cash-heavy, they’ve got a lot of capability to execute, and execute efficiently. And when that happens they drive prices in markets, and they’re actually coming downstream. They used to wait until product was maybe at stabilization, or 80% leased before they would entertain an offer. We’re seeing that move further downstream even 50%-60% leased now that they have an interest in that project. Or, if it’s just starting to develop, they’re trying to get in early to be the lead buyer for that particular project. And then on the exit side, just with interest rates so low and EO hard to find, a lot of these groups and family offices, and even institutional or publicly traded retes are finding it a very competitive space because they’re trying to get in early as well.
Richard: Right, makes sense.