SPECIAL REPORT: Economic Experts Say the Time to Buy is Now
- Sep 19, 2008
By Erika Schnitzer, Associate EditorDenver–In this time of ever-increasing economic turmoil, is it time to buy, sell or hold? At a Multi-Housing World conference session on the apartment investment cycle, three expert panelists seeking to make sense of the past week advise that now is the time to buy.If there are no problems in your portfolio, now is not the time to sell, advised Ron Brock (pictured), president and CEO, Pierce-Eislen Inc. However, he cautioned against purchasing certain properties, particularly luxury apartments and those located in the suburbs. “Condo development is out,” he noted. The “hot areas” are student and workforce housing, particularly those in urban areas.Backing up Brock’s assertions, Keith Rosenthal, co-founder and president, Phoenix Realty Group, explained that although the multifamily sector is currently relatively healthy, banks are under a lot of pressure to sell and investors are holding back. However, he strongly believes that this is the time when the most money can be made. Investors do need to be aware of the skills they possess, whether it be developing/operating, risk pricing or underwriting.Rosenthal suggested that it is a good idea purchase B and C properties in A markets. To make the most money on the buy, purchase at a discount to replace the cost of over-leveraging, he advised. Be aware of the variables, he warned, including GSA financing, the economic cycle–which includes unemployment, technology, government action/inaction and international trading partners–and energy prices and urbanization. The increasing concerns of destabilization are spilling over into other arenas, noted Dr. Sam Chandan, chief economist and senior vice president, Reis, as he described the current state of the market as “almost infectious.” We are finding ourselves in an environment where investors are fleeing aspects of the market that appear to be stable, he added.Despite the overflow of apartments now coming online, in addition to the shadow rental market, Chandan pointed out that the transaction activity has remained relatively stable over the past two years, despite the shift in who’s investing–from mostly foreign investors to those buyers who look at the underlying function of the properties as an operating asset.Brock added that this is not the right market for a quick turnaround, but rather a great time to hold. The session’s moderator, Clyde Holland, CEO and chairman, Holland Partner Group, closed the discussion by explaining that the next cycle will be defined by the three Rs: risk, relationship and results.Some factors to consider in sales transactions: Financing availability;Buyer/seller expectation gap;Relative rental market conditions;Holding period expectations;Availability of capital andPending loan due dates.