Are Institutions Pulling Out of the Apartment Market?

LOS ANGELES—Apartment demand is still hitting record highs, but a nominal shift in market fundamentals is changing the buyer pool. According to Gary Goodman, SVP of acquisitions at Passco Cos., says that institutional investors are leaving the market due to strategies that favor conservatism, and the shift is creating great opportunities for private buyers to pick up some really great assets that they might not have had access to.

“Institutional investors are backing off of the market, particularly for core properties and particularly in gateway cities as well as secondary and tertiary markets,” Goodman tells GlobeSt.com. “There is a concern that has infiltrated the whole industry about where we are in the cycle. We are seven years into the recovery and maybe eight years in terms of substantial rent growth and appreciation. Some articles that are being written and some markets that are seeing rent abetment is kind of scaring people off. It is always safer for institutional capital to err on the conservative side, so it is better to back away.”

Goodman is speaking on the Where the Rubber Meets the Road: Transaction

With institutional investors far less active in the market, private investors, like Passco, are taking the opportunity to strike. “For private capital guys, like us, we have a window for us to enter this environment any buy properties that we normally wouldn't be able to purchase or that we haven't been able to purchase in the past,” adds Goodman.

For buyers with their own capital source, this has also created a unique competitive edge, since they have more flexibility and can close deals within 30 days. “It has been a choppier market for sellers, and part of that is because much of the capital is joint venture capital and a lot of the investors don't have the discretion to invest the money,” adds Goodman. “For those of us that have our own capital, we are a very compelling buyer because we can close a deal in 30 days. Most of the buyers that I go up against are not pension funds or REITs, and the sponsors that have the capital, don't have their own capital.”

This is all creating a pretty healthy surge in business volume for Passco, which expects to double its acquisitions this year over last year, and expects the momentum to carry through 2017. “Our investor pool has really accelerated,” adds Goodman. “A lot of our investors really want to be in multifamily and want to be with a sponsor that knows multifamily. I can't keep up with the demand.”

Specialists Talk Dealmaking at RealShare Apartments October 19th and 20th, where he will discuss these market fluctuations with his fellow panelists, including moderator Kitty Wallace, EVP at Colliers International; James D'Argenio, principal of acquisitions at the Bascom Group; and Steve Fried, principal at Mesa West Capital.

Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.

LOS ANGELES—Apartment demand is still hitting record highs, but a nominal shift in market fundamentals is changing the buyer pool. According to Gary Goodman, SVP of acquisitions at Passco Cos., says that institutional investors are leaving the market due to strategies that favor conservatism, and the shift is creating great opportunities for private buyers to pick up some really great assets that they might not have had access to.

“Institutional investors are backing off of the market, particularly for core properties and particularly in gateway cities as well as secondary and tertiary markets,” Goodman tells GlobeSt.com. “There is a concern that has infiltrated the whole industry about where we are in the cycle. We are seven years into the recovery and maybe eight years in terms of substantial rent growth and appreciation. Some articles that are being written and some markets that are seeing rent abetment is kind of scaring people off. It is always safer for institutional capital to err on the conservative side, so it is better to back away.”

Goodman is speaking on the Where the Rubber Meets the Road: Transaction

With institutional investors far less active in the market, private investors, like Passco, are taking the opportunity to strike. “For private capital guys, like us, we have a window for us to enter this environment any buy properties that we normally wouldn't be able to purchase or that we haven't been able to purchase in the past,” adds Goodman.

For buyers with their own capital source, this has also created a unique competitive edge, since they have more flexibility and can close deals within 30 days. “It has been a choppier market for sellers, and part of that is because much of the capital is joint venture capital and a lot of the investors don't have the discretion to invest the money,” adds Goodman. “For those of us that have our own capital, we are a very compelling buyer because we can close a deal in 30 days. Most of the buyers that I go up against are not pension funds or REITs, and the sponsors that have the capital, don't have their own capital.”

This is all creating a pretty healthy surge in business volume for Passco, which expects to double its acquisitions this year over last year, and expects the momentum to carry through 2017. “Our investor pool has really accelerated,” adds Goodman. “A lot of our investors really want to be in multifamily and want to be with a sponsor that knows multifamily. I can't keep up with the demand.”

Specialists Talk Dealmaking at RealShare Apartments October 19th and 20th, where he will discuss these market fluctuations with his fellow panelists, including moderator Kitty Wallace, EVP at Colliers International; James D'Argenio, principal of acquisitions at the Bascom Group; and Steve Fried, principal at Mesa West Capital.

Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.