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As multifamily sees recovery, some Philly owners say it may be time to build again.
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That was the message from our owners panel at last week's BisnowPhiladelphia Multifamily Summit at the Hyatt at Bellevue. Above, Madison Apartment Group CEO Joe Mullen (left) says thecompressed cap rates and aggressive pricing being achieved on existing apartments—as well as improved fundamentals—is causing his company to consider development. In fact, Joe says they havethree sites in metro Philly for potential new apartment projects, including one that will break ground next year (he didn't elaborate for us, sadly).
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Korman Residential CEO John Korman (seen here in another time and place from our event 'cause we really love this pic of him) concurred, saying that “the numbers are starting to make sense.” John also expressed concern about the pricing of existing apartments, saying there's money to buy, but everyone worries about a potential bubble: “As a buyer, when the cap rate gets too low, we just are not going to make a bad investment. We don't want totarnish our reputation and we want to remain desired as a partner. We will bid and will bid hard, but we often find ourselves saying you know what, that's just as high as we'll go.”
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Both Joe and John were part of the panel that also included AllState Management Co's COO Howard Grossman and Pennrose Properties' president Mark Dambly (with McGladrey's Beryl Simonson as our moderator). Howard says his company is also being cautious on its acquisitions to escape being burned if the market turns. And there's a real chance of that, given that 10-year Treasuries are 2%. “To me, it seems like the same party drug that floating-rate debt was likened to. And one day we're gonna wake upand the party drug's not there any more, and we're not going to feel very good, and we're wondering what to do.” (Sounds like he's comparing T-Bills to the entire 1980s.)
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For Mark, his world is different given his specialty is affordablehousing. Having closed 18 deals last year, including some big revitalization projects for affordable rentals, Mark says pricing onfederal credits is “actually way up,” back to peak 2007 levels where the CRA-driven market from banks is paying 90 cents to $1/credit. If there's a concern, Mark says it would be that Washington pulls the plug on affordable housing credits.
Related Topics: Pennrose Properties, Mark Dambly