to join Jones Lang LaSalle's

GlobeSt.com: What was behind your decision to move over to Jones Lang LaSalle?

Melnick: We have a long relationship with Transwestern. It's a great company, and our team has sold more multifamily product in the Washington, DC area over the past two to three years than anyone else. But with JLL, their platform and vision for growth matched up exactly with ours. The Mid-Atlantic is one of the most desirable and most active spots for multifamily. Along those lines, there's a lot of opportunity. JLL's national and international platform and its visions for growth in multifamily and the capital markets in general, was a perfect fit for our team.

GlobeSt.com: Can you elaborate on that growth strategy? Do you have any plans to expand beyond the Mid-Atlantic or broaden your scope?

Cissel: Right now, we're just going to get settled in and focus on expansion within the Mid-Atlantic, from Philadelphia to Raleigh, NC.

Melnick: When we talk about growth, it's twofold. There's a lot of business in our region and we're fortunate that we get the highest market share, but there's an opportunity to expand here. At the same time, we're able to help JLL in terms of their expansion in other markets.

GlobeSt.com: Overall transaction activity has slowed given the state of the industry, but the Washington, DC area seems to be doing better than other markets, in relative terms. What's behind that strength?

Cissel: The DC market has always been strong. It was slow through the end of 2009, although we completed $350 million in deals at the end of 2009, and moving into 2010, we have a large book of business. The confidence is back, there's still very attractive debt and Washington, DC remains a very good market as it relates to the government and employment. There's employment growth again and supply and demand is very much in check. The pipeline is down quite a bit, which makes multifamily even more desirable to investors.

Melnick: All of that stability and the demand for product have resulted in more transactions taking place than elsewhere in the country. Some of that is also fueled by the busted condo deals that took time to go through the system. There are buyers in the metro area for every type of product—class A, B or C. In terms of growth, there may not be more busted condo deals in 2011 since those have all gone through the system, but we have a large pipeline of deals with special servicers that will be taking place in the latter part of 2010 and 2011. Buyers are willing to be more aggressive, so you'll see an increasing amount of activity. And because of the job growth here, people can factor rent growth into their numbers, if not this year, then next. You can't say that about most other areas.

GlobeSt.com: The DC area did have a condo overbuilding issue. So that has worked itself out now?

Cissel: Yes, and conversely, a lot of investors are now looking into the condo market again. Now that the failed condos have pretty much gone to rentals and have been stabilized, for the most part, there are now buyers looking to buy existing buildings or development sites on a very select basis to contemplate building or converting to condominium in the near future.

Melnick: That's because it's affordable product for first-time homebuyers, which has become a little nonexistent, so people are starting to look at them. Plus, prices are down a little bit so the numbers are starting to work. And toward the end of 2010 to 2011, the same dynamics are going to lead developers to start building new rental product, which has also been nonexistent.

Cissel: If you think about it, the market was somewhat overbuilt, but not tremendously like some others. And there were thousands of condominium units taken off the market when they went back to rental. So there is not a big overhang of for-sale housing. It's starting to look attractive again.

GlobeSt.com: You mentioned debt earlier. Does it seem that lenders are more willing to do deals for properties in the Mid-Atlantic as opposed to some other markets in the country?

Cissel: Definitely. Speaking with Fannie Mae and Freddie Mac, they've said they like the better markets, and the Washington, DC area is definitely a marketplace where they would be apt to make a more aggressive loan.

Melnick: Most of the buyers today are looking at Fannie or Freddie debt. They may have different ideas in terms of loan to values, but they're generally looking at the same type of debt. For the right group, the debt is clearly out there, just like the equity is out there.

We just put a $110-million transaction on the market called Grove Park Apartments. It's a 684-unit property on 40 acres in Gaithersburg, MD being sold by Angelo Gordon and Federal Capital Partners. It has very good interest-only debt on it. Buyers are attracted to it because they don't need to bring new debt on. There are a lot of transactions in the market right now that have good, existing debt. But in general, unlike a year or so ago, any buyer that a seller is choosing is going to be someone that can qualify for Fannie or Freddie debt.

GlobeSt.com: How will transaction velocity do this year?

Melnick: We're going to see an increase throughout the year. There are a lot of groups that have money to put out and groups that have been on the sidelines that are now anxious to get back into the market. Also, as prices have come up, some sellers that may have been on the fence will get into the market. They figure that they're better off selling now than worrying about whether they can refinance in a year or so when their debt comes due.

Cissel: There's also a lot of institutional money. At the end of 2009 and going into 2010, more institutional buyers came off the sidelines and got serious about their return requirements. That put a lot of money in the market. Plus, we're seeing more foreign capital coming into the market. It'll be an exciting year.

Instant Insights /

Jones Lang LaSalle's Cissel and Melnick

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