MHN Online has an interview with Dean Henry, president of Legacy Partners Residential, one of the big apartment building investment trusts (REITs). What I like is that he speaks in bullet points, just the way I think! Here’s my exec sum (in bullet points) of his bullet points:
“There are several important reasons why now is a great time to acquire existing multifamily assets. Let’s start with demand and supply:
- The U.S. population is increasing by approximately 3 million people per year, plus the legal immigrants who enter the country, and 75 to 85 percent of whom rent rather than buy.
- Secondly, the 18- to 35-year-old population totals approximately 65 million and will be relatively constant for several years. It is this age group that generally rents multifamily apartments.
- As we know from our daily news, beginning in the middle of the 1990s, we began losing renters to homeownership. That trend reversed in early 2005, but by then we had lost between 5 and 7 million renters to homeownership, many of whom were not qualified to own a home. Since then, approximately 3.5 million renters who became homeowners have returned to the rental pool creating a significant demand.
- At the same time that the demand has been huge, the supply has dwindled. For the past 15 years or so, new multifamily starts in the United States have averaged approximately 300,000 units per year. In 2009, 2010 and 2011, the aggregate total was just over 300,000, meaning we are building new apartments at the rate of approximately one third of the last 15 years. Clearly, when you have this imbalance of supply and demand, an increase in occupancy and rent levels is predictable and is occurring at this time in almost every major market in the United States.
- While the production of new rental communities is increasing, the opportunity to buy existing is increasing as well. Approximately $380 billion of multifamily debt is maturing between now and 2015. Much of this debt cannot be refinanced
- A significant factor driving apartment transactions, as well as supporting relatively high pricing, are the extremely affordable interest rates provided by primarily the GSEs. Loans of 50 to 65 percent of value with maturities of five to seven years are available in the range of 2.5 to 3.5 percent. This is an exceptionally good time to lock in relatively long-term financing.
Conclusion: “We believe this is an extremely good time to be investing in existing multifamily assets and the opportunities to do so are numerous.” See the whole MHN Online interview here: Why Now Is a Good Time for Multifamily Acquisitions