What a Multifamily Dislocation Play Looks Like in This Market
They are challenging to find but their numbers are increasing as the year continues.
Shoreham Capital has been maintaining a steady clip of multifamily acquisitions over the last 24 months but Managing Partner Doug Faron is the first to admit it has been very challenging.
The firm has been looking for dislocation opportunities – either distress or because of timing necessity – and last year found in many cases that the buyer-seller price expectations gap was too wide to overcome.
It hit pay dirt earlier this year when it acquired, in partnership with Bridge Investment Group, a 1,180-unit multifamily community called Mason at Van Dorn that is located in Alexandria, Va. The $157 million Fannie Mae financing was arranged by Berkadia.
That particular deal was due to an end-of-fund life, Faron tells GlobeSt.com. “They were ready to do a transaction,” he tells GlobeSt.com. “It was time to harvest that asset.”
Faron is one of the participants in GlobeSt.com’s multifamily event being held next week in New York.
He is optimistic that similar transactions will occur this year now that market participants are becoming more realistic about pricing. Another plus is Blackstone’s $10 billion acquisition of AIR Communities this week, which many believe will encourage other multifamily dealmakers to return to the market.
At the same time there is unlikely to be a rush of buyers in the market until interest rates start to come down, putting Shoreham Capital in a very sweet spot in the market.
“When you find a compelling deal with fewer folks trying to buy it you tend to get good terms and more favorable pricing than in a crowded market,” Faron says. “To us, right now is a more compelling time than when there was a fervor of capital available for multifamily deals and everyone was buying what they could. There is a thinner field of buyers now.”
Its progress thus far this year illustrates what Faron is saying. Last year the firm acquired between $125 million to $150 million in assets. This year that number is $350 million to date, with the Mason at Van Dorn deal moving the needle to a significant degree.
“We would like to get two or three more deals like that done before the end of the year,” Faron says.
Multifamily Spring:
Multifamily Spring is coming to New York City this April 18. This year’s program will bring together the industry’s most influential and knowledgeable real estate executives from the multifamily sector for 5 hours of face-to-face networking and over 5.5 hours of can’t miss sessions. Learn more or register here.