CA Retirment Plan Commits Additional $2 Billion to Apartment Builidng Investments.

Updated 1:46pm Correction: Updated to reflect that CalPERS is only shutting down its hedge fund investments, not its private equity placements. See Calpers Is Done With Hedge Funds; Paid $135 Million in Fees Last Year for 7.1% Return at

Was just on a call this morning with Peter Linneman, Chief Economist at NAI Global where they were discussing CalPERS’ decision to eliminate their investments in hedge funds. That hasn’t had any effect on their apartment building investments however [Or has it in a positive way?]. While I was on the call I received a note from PERE announcing that the California Public Employees’ Retirement System (CalPERS), the largest public pension plan in the US has committed more than S2,000,000,000 additional funds to multifamily investments during meetings this past July:

  • $1.33 billion to Institutional Multifamily Partners, seeking multifamily acquisition and development opportunities throughout the US.
  • $412.79 million to a partnership with Invesco Real Estate for core apartment properties in the West and Midwest.
  • $200 million went to a joint venture with Pacific Urban Residential for Class B multifamily assets in the western US.
  • Note that the 200M was in addition to the 214M committed when the JV was formed in January this year.
  • A less than $100M commitment to apartment lender and asset manager Centerline Holding which is now owned by Hunt.

All this was part of a 6.6B commitment to commercial real estate joint ventures, one of the largest single month investments made by the $300 Billion retirement plan. For the details see CalPERS commits $6.6bn to RE on PERE. Note: registration may be required.

What is the average annual per unit expense for an apartment building investment? Great reader question answered.

Mike in Milwaukee, WI, that is a great question. Answer: $3,000- 5,000/unit/year. How’s that for an accurate but relatively useless answer?  The real question is what is the annual expense per unit of the property you are looking at?  If you are a large institutional investor like a REIT looking at national or regional averages like those published in the NAA Annual Survey (See the included charts for results from the 2011 survey) can give you an indication but you can bet the institutional players know their own costs to the penny.

Apartment Building Operating Expenses Per Unit 2011
Source: NAA 2011 Survey of Operating and Income Expenses in Rental Apartment Communities

In most larger metros there are also companies who collect and publish apartment surveys showing the areas average rents, occupancy, expenses, etc. One thing to make sure of is that the survey is based on properties similar to yours.  There are a number of national companies doing multifamily research but they tend to focus on institutional sized properties 100 units and up so their numbers wouldn’t be comparable for a smaller property. For instance the average property in the NAA survey has about 250 units.

The most important number is the actual Continue reading What is the average annual per unit expense for an apartment building investment? Great reader question answered.

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.

What do these Niche Multifamily Teams know about battling the big guys (and winning) with Apartment Building Investment?

Great MFE article on apartment building investment  niche strategies from teams who battle the big guys and win. Five different teams and strategies are profiled and they all have something to teach but I wanted to highlight one company whose strategy is very similar to ours. Here’s my exec sum in bluue:

LumaCorps Apartment Building Investment Strategy

LumaCorp. quietly owns and operates a 4,800-unit portfolio of 1980s, Class B properties managed to meet the needs of working-class renters.

These [renters] historically can’t buy a house, but they still want clean, quality, safe housing. We think it’s a much bigger slice of the market than other renter demographics.

Rent growth can be modest, but that’s OK. One of the advantages of owning property in small tertiary markets is that they are less active [in terms of new construction and competition, the rent growth is more predictable.LumaCorps Apartment Building Investment Strategy

LumaCorp. begins with old-fashioned real estate research, looking for distressed or underperforming working-class properties with potential. “We make money by fixing problems.”

But the firm isn’t interested in just any Class B property with deferred maintenance and an attractive price.

We’re very picky about the properties we acquire

We know our market very well, and we know what works in terms of floor plans, unit mix, and architectural designs.

We pick a property with good bones, and then we invest the money to bring it up to our standards.

LumaCorp. runs some of the tighter costs, yet when you drive up to the property, it always looks terrific. Some multifamily firms spend lots of money, and their properties still look tired.

Only a few properties will make the cut for the LumaCorp. treatment. We might look at 100 packages. Out of that, we’ll find 20 worth looking at, and 10 will get offers. One might get done,” says Kelly, who made “a couple dozen offers” in 2011 and got one—Bardin Oaks in Arlington, Texas.

See the whole MFE Mag article here: Niche Guys Win


Pathfinder Buys REO Multifamily Complex Near Seattle for $5.1M Via MHN Online. 78 units @ $65.4k+/unit

San Diego-based Pathfinder Partners LLC makes Apartment Building Investment in Seattle area.

Seattle Area Apartment Building Investment

San Diego-based Pathfinder Partners LLC has acquired the View at Redondo, a 78-unit apartment property in Federal Way, south of Seattle. The apartment complex, built on a …. [Cut to the chase]

Key Concept:

“We believe there are opportunities throughout the major markets in the western United States to invest capital in high-quality projects with distressed or fatigued ownership that will result in significant returns,” Lorne Polger, senior managing director of Pathfinder Partners, tells MHN. “To that end, Pathfinder focuses on smaller apartment building investment, sized below the radar of the largest institutional buyers.

The company’s strategy, Polger adds, is to buy the loan on a small property that needs finishing, has a large vacancy, or is beset by other issues. “These are typically transactions that need to be concluded very quickly, on an all-cash basis,” he says. “We have a track record of closing this type of deal in 15 to 20 days, and frequently get the call when a financial institution is seeking to conclude a challenging deal quickly.”

A very good strategy indeed.

Increasing Sources of Multifamily Rehab Funding Spur Value-add Projects.

3-4% 10yr bridge money for apartment building investment and rehab “coming out of the woodwork”. See the whole article here: Capital Streams Grow for Rehab

Apartment Building Investment MFE Mag

Where is your apartment market in the cycle? Latest Multifamily Market Cycle Charts now posted via Glenn Mueller, PhD.

See the details and charts for the other CRE sectors here:

Latest NMHC Multifamily Survey: Tightening Markets, More Sales, Debt and Equity Financing Becoming More Available.

See the report here: NMHC Quarterly Survey of Apartment Market Conditions

Multifamily Sales Close Out 2011 on the Rise, Lead by Garden Style.

A recent report from New York–based commercial real estate research firm Real Capital Analytics (RCA) reveals that apartment sales figures closed out 2011 on a positive note. The firm’s “2011 Year in Review” report shows that the fourth quarter of 2011 netted $16.6 billion in sales, the highest quarterly volume racked up since 2007. This marks a 16 percent increase from the previous quarter and a 24 percent bump from fourth-quarter apartment sales in 2010. Among the more optimistic data revealed in the report was the rebound of garden-sector sales.

Garden properties ended up 47 percent ahead of the 2010 figures, and it appears that the sales momentum experienced in the fourth quarter will carry over into the first quarter this year. “Given the stable cap rate environment for garden properties, compared to sinking caps in mid-/high-rise, that trend is likely to continue in 2012,” projects Thypin.

See the whole AHF article here: Apartment Sales Close Out 2011 on the Rise