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BOSTON-Commercial real estate sales stumbled to a slow finish last year and have had difficulty gaining traction to begin 2008, but such has not been the case for the multifamily arena, with industry specialists reporting both plentiful capital and product are boosting prospects in the early going. “The forecast is looking very positive,” says Apartment Realty Advisors principal Richard Robinson, a member of the New England office that traded more than 2,000 units last year and has nine deals under contract representing another 1,200 units less than a month into 2008.

“We are very optimistic by what we see,” agrees Cushman & Wakefield principal Biria St. John. “It’s a very deep pipeline.” The multifamily team led by St. John and partner Simon Butler orchestrated $1.27 billion in transactions in 2007—up from $750 million the previous year—capped by the $160.9 million sale of Windsor Gardens in Norwood. Despite that frenetic pace, C&W is already ahead of 2007′s launch with close to $400 million preparing to hit the sales block, relays St. John.

The demise of condo converters that eased multifamily pricing for a time has been overtaken by a cadre of domestic pension funds eager to buy into the rapidly improving apartment market, according to industry observers. “The fundamentals are very strong,” says Robinson, as evidenced by a decline in concessions to lure renters. Robust, supply constrained markets such as Cambridge have almost completely eliminated free rent and other concessions, he says, while St. John attributes the solid showing partly to the subprime mortgage morass that has made home buying more difficult. Income projections for apartments in New England are already being calculated upwards as part of the investment sales process, says St. John. That could cause friction for those capital sources anticipating an adjustment in pricing in light of the commercial real estate slowdown.

Many pension funds are demanding higher returns, says St. John, but the mounting wave of capital could limit clout for multifamily suitors. “There is a lot of money trying to get out into the marketplace,” he says, and lower interest rates should only contribute to that pool. Robinson puts the average capitalization rate for class A apartments in the region in 2007 at 5.1% and predicts an adjustment upward slightly by 100 to 150 basis points, but he concurs that could be impacted by investor demand. In any event, ARA New England hopes to increase its pace of sales from an average of 15 in the past two years to possibly 20 in 2008. Given the solid beginning, Robinson expressed optimism of achieving the growth projections, although he declined to specify details of the current sales.

St. John was equally mum in identifying the properties C&W is taking on, but says there are some sizeable opportunities that will be in play. Even so, it could be a challenge to beat out the 2007 performance for C&W’s New England multifamily group, which brokered the sale of two assets over 900 units each, the $181 million sale of Granada Highlands in Malden and the 914-unit Norwood complex. The Norwood investment by Berkshire Property Advisors is the Boston-based company’s first in its backyard after assembling a national portfolio of more than 40 apartment communities. “It fits perfectly with our value-added strategy,” Berkshire principal Stephen Zaleski says in a release acknowledging that deal.

C&W negotiated the Norwood sale on behalf of GID Investment Advisors LLC, with St. John and Butler joined by Capital Markets Group chief Robert E. Griffin Jr. in representing the seller and procuring the buyer. Although GID put substantial capital into Windsor Gardens during its tenure, and had occupancy up to a robust 95% at the time of sale, St. John says the new ownership is making additional improvements to further reposition the complex. Besides refurbished amenity and leasing centers, Windsor Gardens has a new fitness facility, on-site day care and various recreational options including two playgrounds, basketball and tennis courts and a swimming pool. There is also parking for 1,200 vehicles, but St. John says a special draw is the property’s own rail stop connecting to Boston and points south.

Berkshire’s investment also continues a migration of new multifamily investors pursuing New England properties. Also making their initial forays into the region last year was TGM Associates of New York City and the Steven D. Bell Co. of Greensboro, NC.

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