Gebroe-Hammer Sees 'Spring Fever' Hitting Multifamily Investing

Ken Uranowitz, president, Gebroe-Hammer Associates

LIVINGSTON, NJ— Spring fever – often associated with the month of May – seems to be hitting the multifamily market, according to Gebroe-Hammer Associates, which says it closed six separate sales in four days. Some 253 units sold for a combined $36.522 million, according to Ken Uranowitz, Gebroe-Hammer’s president. “The general feeling of excitement people experience at the beginning of spring is being mirrored by what we are seeing in terms of apartment-building sales,” says Uranowitz.  “Strong market fundamentals are driving record-setting deal velocity. This includes, but is not limited to, voracious demand and heated competition for multi-family investments in an under-supplied marketplace, exceptionally high occupancy rates thanks to the Great Recession’s impact on single-family ownership and the cheap cost of debt.” Uranowitz also tells GlobeSt.com exclusively that there are several other factors influencing the frenzied activity. “When it comes to long-held multi-family properties, original builder/owner families realize the time is right to monetize their assets,” says Uranowitz . “These original builders have been around long enough to remember previous downturn cycles and double-digit interest rates.” Younger family members may not be interested in continuing to operate the properties, he says. “Second and third generation family members are, by and large, either located well outside the area and/or in different businesses unrelated to real estate,” says Uranowitz . “These builders and long term owners’ primary motivation is to cash in their chips on an investment where so much value is trapped.” Gebroe-Hammer exclusively represented a high percentage of builder/owners in the latest transactions. “Several have decided to defer capital gains taxes by re-investing the proceeds into other, perhaps newer, less management-intensive multi-family properties,” says Uranowitz . The result on the industry: an exponential increase in deal flow. Aside from last week’s half-dozen closings, Gebroe-Hammer has closed 51 year-to-date deals valued at more than $881 million, representing 5,456 units. Adding to this heightened deal velocity are institutionally and fund-owned properties, which are being shed. These investors are taking advantage of the demand for higher quality class-A product and the resulting premiums that are being paid, Uranowitz says. “Nothing is ‘forever,’ but I expect this pace to continue into the foreseeable future unless, of course, there’s some catastrophic geo-political event or a sudden dramatic increase in rates, which will not happen,” he says. “Although the Fed has expressed its intent to increase rates, it will go easy on the gas pedal over time and will increase in small increments, perhaps a few gradual 25 basis-point bumps to test the waters.”