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Cheap Money Good, Bad for Multifamily Investment

SEATTLE, WA-It is an odd combination of numbers and forces. Properties and investors are both on the prowl. Financing is available--and cheap. But transactions are few and some predict deal flow to drop.

By Janet Parker | Updated on December 14, 2001

SEATTLE, WA-Local economics are forcing apartment properties across Puget Sound to reduce rents at the same time many expenses are on the rise. It might not sound like a formula for enticing investors to the bargaining table, but many appear to be on the hunt. By itself, apartment listings on the Commercial Brokers Association Web site (www. cba.epropertydata.com) number 48. But little is happening in the way of transactions.

“December should not be this busy,” Morris H. Groberman of Colliers International tells GlobeSt, “but I have plenty of buyers.” A driving force he explains is the availability of long-term money at low interest rates. Groberman says apartment financing can now be had in the 6′s. Checking today’s rate sheet, he says a ten-year fixed FNMA loan can be had at 6.85%.

Seattle apartment analysts, Dupre+Scott, have predicted average vacancies across the region will hit 7.5% net year. Walt Smith, VP and principal of HSC Real Estate, believes 8.5% will be closer to the truth. Furthermore, at a local gathering of industry experts this week, Smith said, “Prices in the multi-family market are going to go down by 10 to 15 percent in 2002.” He also expects the volume of apartment deals will drop as low as $550 million next year–contrasted with $650 million in 2000 and $1.5 billion in 1998.

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