MHN Online has a nice piece out this morning talking about what institutional and private equity equity providers are looking for in their apartment building investment deals. According to Brian Ward, CIO of TCG Capital Markets, the requirements are much tighter than just a few years ago. Here are the high points:
Align the style and needs of the capital source with the operator. A long term operator shouldn’t be matched up with private equity that needs short term holds to clear their return hurdles.
Just got an email from Jay Denton, Research VP at AXIOMetrics saying the national apartment building occupancy is 94.3%, a level not seen since 2006. Class A occupancy is at 95.5%, class B is 94.8% and class C is 92%. Also many submarkets around the country will see the first new supply of units this summer. Even so properties in Lease Up are doing well, averaging more than 20 move-ins a month. Further strength in the market is reflected by the fact that concessions are down to only 2-3 weeks in many markets.
As the next building cycle for the Portland area is still another year out, vacancy rates are expected to fall to historic lows across the metro. The overall vacancy rate will match the lowest on record at 2.7 percent, while the area’s lower-tier vacancy will fall to as low as 2 percent.
Marcus & Millichap notes that a lack of multifamily construction and the expansion of jobs in the region will be the prime factors behind the extraordinarily high rates of occupancy. Job growth is expected to rise 3.1 percent—from 20,500 positions created in 2011 to 31,000 positions created in 2012. Of particular significance will be the development of a new Intel facility, which is expected to create thousands of construction jobs and spur large demand for Class B and C apartments.