April, 2012 | Ashworth Partners

Clash of housing bottom fairy tales: Big Bad Wolves v. Robin Hood Investors.

My friend and fellow real estate investor Mei was asking about competition for single family REOs from big institutional players buying them at the courthouse as in the Bloomberg article here. The article profiles Waypoint, a Southern California real estate investing outfit that has developed some great technology to facilitate buying and leasing REOs. Check out Waypoint’s website, it’s the best example I’ve seen of the lease/option, credit repair, rent-to-own strategy for real estate investors.

It is a great question and one that I’d been wondering about too. Just so happens I was meeting with one of my private equity clients last week and we had a long conversation about that very subject. My client is the real estate/mortgage specialist at a 50B firm and they’ve been trying to crack this market profitably for about a year. Here’s the bottom line: Private equity needs to earn Continue reading Clash of housing bottom fairy tales: Big Bad Wolves v. Robin Hood Investors.

Handy Apartment Building Investment Market Reports- interactive one-pagers from Reis Reports.

Reis puts out these really handy one page reports with all the major QoQ changes broken out by sub-market. Here’s the latest on Portland, OR:

Click on the image above to go to a list of markets then select Continue reading Handy Apartment Building Investment Market Reports- interactive one-pagers from Reis Reports.

The Yin/Yang of Apartment Building finance: Urban Equity v. Suburban Debt.

[Urban] TOD (Transit Oriented Development) has performed better and has a sexier image with many institutional investors. But while equity investors continue to favor urban TOD, developers are having a more difficult time finding construction debt at leverage levels that would make those deals pencil out.

Urban Apartment Building Investments

Meanwhile out in the ‘burbs: “On suburban sites, you see yields in the 7 to 8 percent range. On the core infill, you’re really building to a 5, 5.25 percent, maybe, and that’s getting dangerously close to acquisition cap rates.”

Suburban Apartment Building Investment

“We’re in an interesting situation now, where anytime you have a Continue reading The Yin/Yang of Apartment Building finance: Urban Equity v. Suburban Debt.

Building Porn

Barry is one of my favorite writers on finance, the economy and politics but I don’t want to just be a feed for his blog. Some days however he’s got too much good stuff and today is a prime example… in a fun way. Check out this chart of the Skyscraper Index Building Bubble. Clicking on this link will take you to a large image. Clicking on the image below will take you to the original post on Barry’s blog:

Macro Economy is to Micro as Newtonian Mechanics is to Quantum. Must watch video.

The mainstream economic model grew out of physics envy says Bill Miller in this must watch video about the difference between economics on a personal level and economic systems, i.e. the US. Plus former Pimco Fed maven Paul Mculley on why standing up at a concert doesn’t get you a better view.

Seriously though you will never get a better explanation (in terms everyone can understand) of why standard monetary and fiscal policy don’t work in the current era, if it ever did.

Watch this 26 minute video and you will understand more about today’s economy… and how to fix it than 98% of the jabbering know-it-alls on TV- including 99.99% of the politicians and good chunk of the so-called experts. This is your opportunity to access top level outside-the-box talent that you would have to write a (very) big check to access any other way. And to get them both at once without having to attend the Paris conference of the Global Interdependence Center’s Society of Fellows last month.

McCulley presented Continue reading Macro Economy is to Micro as Newtonian Mechanics is to Quantum. Must watch video.

Biases That Cripple Smart Decision-Making; Great behavioral economics intro- but I’m biased.

Psychologists claim that many of our biases are evolved mental processes which at one point may have been adaptive to our environment. Because the mind is not a perfectly calculating machine, it uses many different heuristics (or “rules of thumb”) that help guide the decision-making process. Although this process isn’t perfect, it often gets the job done in terms of survival and reproduction. Many of these biases may still be functional in today’s world, but others can greatly inhibit us from making rational and intelligent decisions.

avoiding flawed thinking in apartment building investment

Starting with the Bias Blindspot which is our tendency to think we are less biased than others the article lists the different types of biases investors (and everyone) face and more importantly how to overcome them:

· Confirmation Bias
- We tend to favor information that supports our preconceptions Continue reading Biases That Cripple Smart Decision-Making; Great behavioral economics intro- but I’m biased.

New AIG apartment building investments likely to total 100s of $millions annually.

Big apartment investment news from bailed-out insurance company AIG:

“AIG plans to make fresh domestic investments later this year and has already reached out to developers of new apartment buildings in major metro areas.” AIG’s new investments will likely amount to hundreds of millions of dollars a year, though it hasn’t set specific targets yet

AIG apartment building investment moves

Specifically, AIG has expressed interest in a $100 million project in Montclair, N.J. aimed at transforming a former Jaguar dealership into an apartment complex that will include retail and office space, the paper said. AIG, which is still 70%-owned by taxpayers, is also eying property in California and the Southeast U.S

See the whole article here:

Continue reading New AIG apartment building investments likely to total 100s of $millions annually.

Fannie, Freddie and Ginnie do $13.5B in apartment investment lending biz during Q1, +81% YoY.

Bonds backed by Fannie Mae and Freddie Mac tied to apartment investments soared to a record as the government-supported mortgage companies made low-cost loans on rental properties amid a continued slide in home values. Fannie Mae, Freddie Mac and Ginnie Mae sold $13.5 billion of securities tied to apartment buildings in the first quarter of 2012, an 81 percent increase from the year-earlier period and up from $5.2 billion issued in all of 2008, according to data compiled by Bloomberg. It’s the highest quarterly issuance since records began in 1993.

Apartment Building Investment Loans from Freddie, Fannie and Ginnie

The interest rate for a 10-year, fixed multifamily loan Continue reading Fannie, Freddie and Ginnie do $13.5B in apartment investment lending biz during Q1, +81% YoY.

Rising rates won’t necessarily lead to higher cap rates on CRE, apartment building investments. CBRE debt & equity podcast.

Great podcast on the financing market for CRE and apartment building investment with a look at potential impacts from events around the world.

“In this Global In-Sights podcast, Spencer Levy, Executive Managing Director for CBRE Capital Markets, shares his view on the commercial real estate debt and equity finance markets. What are current key sources of capital, what is the current pricing of CRE debt, and what are expectations going forward? Are there key sectors that are attracting most of the capital flows? What are expectations for interest rates and how are investors underwriting the possibility of an interest rate spike in the next 2 to 3 years? What are some of the key positive trends that we suggest our clients look out for when selecting markets in which to invest?”

Podcast Link

A few bullet points: Continue reading Rising rates won’t necessarily lead to higher cap rates on CRE, apartment building investments. CBRE debt & equity podcast.

Portland OR Q1 Apartment Building Investments Now Posted.

Here are some interesting transaction statistics for 1st Quarter apartment building investment transactions:

Average price per unit was up 11% from Q1 2011
6.86% was the average cap rate, vs. 7.07% in 2011
77% of properties sold had between 5-50 units

Click on the image to see the list of Q1 apartment building investment sales in Portland:

For more on PDX apartment building investment see City Rents Rise As Buyers Wait Out Housing Bust from Joseph Bernard Investment Real Estate.