What Multifamily Buyers Really Want

MIAMI—How has the influx of foreign capital into Florida multifamily changed? What does it take to get deals done today? Have mindsets of buyers and sellers changed?

In part two of our exclusive interview with HFF director Elliott Throne—and as a preview to Real Share Apartments 2013 on March 3-4, we discussed these and other issues. You can still read part one, Multifamily Outlook: Strong or Cautiously Optimistic?

GlobeSt.com: How has the influx of foreign capital into Florida multifamily changed?

Throne: We have always seen foreign capital come into this market so it hasn't really changed much, but the location from where this capital comes from has changed over time. This influx continues to provide great support for the market but overall buyers are still being somewhat careful to try and not let things get out of hand like they recently did.  

GlobeSt.com: What does it take to get deals done today?

Throne: Same as it always has been. You need a seller who really wants to sell and a buyer who sees further opportunity in an asset. When the buy-sell gap is too wide, would be sellers end up holding on to assets versus letting go of them at what they see as below market value.

Without any outside  factors coming into play, this causes deals to stall. When you have a situation, like today, where some people see even more prosperity while others see potential for some pullback, it allows the market to make a bet on their perceived side of the trade.

With the potential for higher interest rates effecting overall returns and new supply still coming, it makes for a compelling case to sell at today's value. A buyer who has a longer term hold strategy and wants to take advantage of what is still a very low interest rate environment will jump all over the opportunity to purchase that same asset, especially in our market where the long term continues to be bright.

Owners love selling in a market where they have a very difficult time buying. The bigger issue we see is sellers wanting to take advantage of the price at which they can sell but not having another investment to supplant the return they are receiving in their current asset.

GlobeSt.com: Have mindsets of buyers and sellers changed?

Throne: I am not sure they have completely changed but they are being more aware. I will go as far as saying they are being more disciplined. And this is actually a good thing. Sellers may not be getting huge premiums they might desire but its keeping the overall market in a healthy pattern of forward momentum. Rent growth may not be as high as it was recently but it is still growth. New developments are being successfully introduced to the market. Trades on new assets are coming in at aggressive price per units. But overall, the discipline is keeping things in check.

GlobeSt.com: Have mindsets of buyers and sellers changed?

Throne: I am not sure they have completely changed but they are being more aware. I will go as far as saying they are being more disciplined. And this is actually a good thing. Sellers may not be getting huge premiums they might desire but its keeping the overall market in a healthy pattern of forward momentum. Rent growth may not be as high as it was recently but it is still growth. New developments are being successfully introduced to the market. Trades on new assets are coming in at aggressive price per units. But overall, the discipline is keeping things in check.