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January 12, 2011 
 
 
Multifamily Shines

 

It’s dark and snowy in Boston today, but at yesterday’s Bisnow Multifamily Summit, we counted 575 of you receiving news that was all sunshine: high occupancy, rising rents, rebounding values, and new construction.

 

Here's two-thirds of our first panel: moderator Bingham McCutchen’s Rich Toelke, The Hamilton Co’s CEO Harold Brown, and GID's Thad Palmer. Thad says he spent most of last year arranging one of the largest deals in the US, GID’s co-investment and takeover of management for CALPERS’ $2.8B in multifamily buildings around the US. In the next 12 to 24 months, he expects to make about $1B in acquisitions. Harold, whose privately owned company has a 5,500-unit apartment portfolio, says now's the time to buy multifamily. The Greater Boston market is only 20% into recovery so the upside is ample. On his recent $41M Brattle portfolio purchase, he expects a cash-on-cash return of 13% to 14% next year. Harold says he's winning bids for assets because sellers and lenders know he’ll close based on his 56-year track record. (Sorry, you can't buy that.)

Berkshire Property Advisors’ David Olney runs its $580M Multifamily Value Fund II. Starting in ’10, his strategy has been to focus on debt recapitalization, working his way up the capital stack. Through ’12, he wants to make acquisitions buying equity and doing JVs with local groups. He expects the holders of $238B in multifamily debt will need capital. BTW … Harold Brown notes cap rates vary depending on how you do the numbers. On his Brattle purchase last month, the seller assumed 4.5%. But Harold tells us, based on the performance of his entire portfolio, he calculates a 5% cap for his new Arlington and Cambridge apartments. 

AvalonBay Communities’ Bill McLaughlin, who oversees a $2.5B pipeline of construction and land in the Northeast, says the pendulum has swung dramatically since ’08. Back in the day, Avalon’s share price was $38—recently it’s been around $112. His development focus has also shifted from “over amenitized,” 40B complexes in the suburbs to urban, transit-oriented projects. Throughout the recession, he says DC remained the top market and Boston came in a solid second. He says the industry is coming out of recession and will see a tremendous increase in values.

Our capital markets panel spotlighted Freddie Mac’s Tom Pohlmann, CW Capital’s Andrew Gnazzo, Reznick Group’s Fred Copeman as moderator, CBRE’s Paul Donahue, and Cambridge Saving’s Bank’s Michael Lindgren. Tom noted that Freddie and Fannie control about 85% of multifamily market transactions and last year Freddie did $14B in deals (78% refi, 22% acquisition). Tom says his mandate is to be active in every type of market (urban, suburban, rural) with high- and low-end assets. His ’11 goal is $14B to $15.5B in transactions.

We snapped Tom with CW’s Andrew Gnazzo, whose firm placed $2.7B in debt last year, $1B with HUD. The process is time consuming, but he says it works if you can “get through the pain.” Meanwhile, none of CW’s Boston or New England properties had trouble in ’10. CBRE’s Paul Donovan tells us that Greater Boston’s turnaround for this cycle is “far more hardy” than in the '90’s. The region has witnessed population growth and constrained supply that leaves room for rent growth. He’s an optimist. Mike says for his mid-level local bank, " location, location, location" has switched to "sponsor, sponsor, sponsor." They’re underwriting first based on how sponsors performed during the recession, then they look at location and deal details.

 

Speaking of sponsors, we'd like to give a shout out to one of yesterday’s event sponsors, CBT Architects. We snapped Robert Brown (arms folded), a principal who's worked on the biggest new Boston developments in this cycle: Boston Properties’ Atlantic Wharf complex and Liberty Mutual’s new office in Back Bay. If you call him “Lobby Bobby” for all those public spaces he’s designed, he will respond.

 

We'd like to thank Infinity Structures' Jack Lawrence and Jeff Hundley who filled us in on their special multifamily structural system for efficient construction. And we'd also like says thanks to sponsors Bingham McCutchen, CB Richard Ellis, and CW Capital. We appreciate your support!

 

Please send ideas to Susan Diesenhouse, susan@bisnow.com

 
 
 
 
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