Apartment broker Mike Buhl sees a trio of trends that keep cleaving multifamily sales into two investment markets, one high and one low:
Fire-sale pricing prevails at the bottom, where there is a lack of long-term financing for poor properties. Investment capital is flowing mainly to the top and the high performers. Investors who already have a stake here are buying from one extreme to the other.
“There is still a big disconnect between the most desired and most troubled assets in the market,” said Buhl, whose Commercial Realty Resources Co. recently released its midyear apartment report.
At the bottom
Sales of distressed assets made up 88 percent of transactions for pre-1980 properties the first six months of 2011, he said, “really weighing down the average for the earlier-vintage apartments.”
Buhl pointed to two sales he handled, the 338-unit Overlake Apartments, 7920 NW 21 in Bethany, and 184-unit Whitby Court Apartments, 7525 Knight Lake Drive.
The two sales accounted for 522 units at an average price per unit of $5,460. The average price for all eight pre-1980 sales was $6,592, he reported, which was just more than one-third of the average this time last year.
He said he expects “a big rebound” in the average price for the older apartments in the second half of 2011 because so many distressed properties are selling.
At the top
Newer properties and others that are performing well and nearly full are appreciating in value because sellers, seeing willing investors, are under no pressure to discount prices, he said.
“The capital that is available today is flowing predominantly to top-quality properties with high occupancy rates,” Buhl said.
The average price for 1980s apartments at midyear was $44,547 per unit, compared to $35,583 this time last year, on a total volume of $21.6 million, compared with $2.1 million the first half of 2010, he reported.
“The buyers who are actually closing the transactions are those with an already established presence in the market.