Multifamily Monday: The Experts Weigh In
Fact: Some 63k jobs were added in DFW between January and April.
Fact: Last year's college grads are in the workforce.
ARA founding partner and managing principal Brian O?Boyle (whom we snapped last week at his Dallas office) tells us fewer deliveries and strong job growth have resulted in rental increases for the first time in a couple of years. DFW typically averages 10,000 to 13,000 new units annually; this year less than 5,000 will be built, the lowest in 18 years. Sales-wise, the largest buying segment is high-net-worth individuals, but he's seeing more private equity funds and pension funds enter the arena. Activity in the land division picked up and developers are searching for sites. What's different this cycle is financing for new projects requires about 35% equity. (Or charming smiles must be 35% bigger.) Banks are much more cautious, too. The developers without legacy loan issues that are well capitalized will be the ones to rise to the top, he says.
Brian says ARA closed 14 deals worth $260M in the last 60 days; there's another $120M under contract with hard money expected to close in the next 30 days. The level of closings will pick up significantly in the next six months with 2011 transaction volume far exceeding 2010, he tells us. ?It will be years before we get to the high-water mark we hit in 2007, but I think Dallas and Houston will be some of the highest transactional markets in the country in terms of sales.?
Many multifamily owners think now is a good time to sell because they have concerns about whether the low cap rates we're achieving will be sustainable. Interest rates are at historical lows—some at sub-4%— enabling buyers to be more aggressive in their pricing. Some buyers are even working with access agreements and willing to put up non-refundable earnest money when the contract is executed. One recent deal had a buyer putting up $500k non-refundable earnest money, he says. There's even more that Brian could tell us, but we had to leave some for when he moderates a panel at Bisnow's Second Annual Multifamily Summit (last year's crowd above) on June 29 at the Westin Galleria. Register now. Great schmoozing too!