Surfin' the East Coast
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|The thriving multifamily market has been keeping Gibson, Dunn & Crutcher partners-slash-multifamily gurus David Furman and Andy Lance on their toes. And it's not just the New York City metro market that's active. The attorneys have been working on deals up and down the East Coast, noting a particular uptick for apartment sales in New Jersey, Baltimore, DC, and the Southeast. A growing number of clients are seeking to invest in multifamily as rental rates rise and homeownership declines, they say. The assets also offer stable cash flow and increased demand, and debt is available for these deals, with rates as low as 5% from agencies like Fannie Mae and Freddie Mac.|
|One recent NJ transaction (David and Andy weren't involved in it) was Hartz Mountain Industries' $31M purchase and $22M acquisition financing of Morristown, NJ's Morris Crossing, a 123-unit, six-building apartment community. But there are some concerns with investing in multifamily, they point out: There's some uncertainty about Fannie and Freddie, the ability of future bond financing, the rebalancing of pricing, and cap rate compression. You have to make sure your clients and properties are protected if they're closing quickly on a deal—and there's been a particular frenzy with a diminished pipeline of quality product. When investors start buying assets in lower subclasses, they must do their due diligence on the asset, area, local economic situation, and tenant population. In the future, clarity from rating agencies and the resurgence of CMBS could be a boon for the market.|