A long-standing stalemate in the multifamily investment market is beginning to thaw, as narrowing bid-ask spreads bring buyers and sellers closer to agreement and revive transaction activity.
For much of the past two years, the sector has been defined by a pricing disconnect. Buyers sought steep discounts amid rising interest rates, while sellers held firm to peak-era valuations. Now, with rates stabilizing and more transactions closing, pricing clarity is beginning to return, Bret Hewett, head of acquisitions for ACRE's equity platform, told Institutional Real Estate in a recent Q&A.
That shift is being driven in part by mounting refinancing pressure, Hewett said. As loan maturities approach and borrowing costs remain elevated, many owners who previously relied on extensions are increasingly being forced to act, with less ability to wait for valuations to recover.
As a result, more assets are beginning to trade, even when property-level fundamentals remain relatively stable. Hewett said many current opportunities are being driven less by operational distress and more by challenges within capital structures.
This dynamic is reshaping acquisition strategies. Rather than pursuing traditional common equity deals, investors are increasingly targeting recapitalizations and structured equity investments, including preferred equity and rescue capital. These approaches allow investors to inject fresh capital, often stepping ahead of existing equity, while helping sponsors address refinancing gaps, Hewett said.
For firms like ACRE, flexibility across the capital stack has become a competitive advantage. Hewett said the ability to combine credit and equity capabilities is helping firms source off-market opportunities tied to capital structure dislocation and structure investments with an emphasis on current yield and downside protection.
At the same time, investors are becoming more selective, Hewett said. Markets with durable demand drivers and manageable supply pipelines are attracting the most interest, while areas facing elevated new supply, particularly in parts of the Sun Belt, are drawing greater scrutiny.
Underwriting remains cautious. Investors are stress-testing rent growth assumptions, widening exit cap rates and prioritizing deals that can perform under more conservative scenarios, according to Hewett. Returns are increasingly driven by basis and structure rather than expectations of near-term market recovery.
Looking ahead, the continued convergence of buyer and seller expectations is expected to support a gradual increase in transaction activity. As refinancing pressures work through the system, more opportunities are likely to emerge, driven by the need to realign capital, Hewett said.
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