"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.

But if investors are looking to buy, financing is cheap and prices are anticipated to fall, why fewer deals? "I don't think we'll see sellers actually agree to these discounts," says Smith. "With lower interest rates and what is still a favorable lending environment, most [owners] will refinance, pull their cash out and wait for the next upturn."

Groberman agrees to a point. He says ownership in the apartment sector here shifted heavily over the last five years to deeply-pocketed institutions such as REITS and pension funds--owners that can well afford to wait out a sagging market. Nonetheless, he says, "There are deals out there."

Speaking to the availability of properties, Groberman says, "There aren't as many as we'd like to see." Or at least not with the right pricing. Unlike the heady sums investors threw at properties the previous few years, Groberman says, "People aren't buying pro forma any more—they buying actual, real numbers." Consequently, sellers unwilling to "get real" with their prices will see their properties grow old in their listings.

The issue of "getting real" since September has sent some deals down in flames and put others on hold. Frank Bosl with the Seattle office of CB Richard Ellis has experienced the shift first hand and has been working to hold transactions together. "We had a number of deals that were pending [in September]. Some continued to move forward, and some came apart when the buyers began looking at the properties with new assumptions."

Instant Insights /

Cheap Money Good, Bad for Multifamily Investment

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