Property Types
Multi-Family
Jun 24, 2009
By: Barbra Murray, Contributing Editor
The apartment market held up relatively well during the early stages of the economy's descent--but even it is now in decline. And while many investors are shying away, industry veterans Jim Butz and Greg Lamb are jumping in with both feet. The two former principals of leading multi-family developer JPI East have teamed with office and mixed-use developer Akridge to launch Jefferson Apartment Group with the intention of acquiring--and eventually--developing apartment properties in the Mid-Atlantic and Northeast regions.
The average national apartment vacancy rate hit 7.2 percent in the first quarter, and it is on track to reach 8 percent this year, which would mark the highest level since 1980, according to a recent report by Marcus & Millichap Real Estate Investment Services. Additionally, effective rents will likely decrease as much as 5 percent. However, from Jefferson Apartment Group's perspective, there is a positive side to the grim statistics.
"We believe the market is clearly at a low point, maybe not at the bottom, but it's an opportunistic point to be in the market buying assets at advantageous prices; to start now and move forward from what is close to the bottom of the market," Butz told CPN. Butz will serve as owner and managing partner of the new firm, while Lamb will hold the positions of owner and executive vice president. "There is dislocation of the capital markets, which is creating some buying opportunities."
To start, Jefferson Apartment Group, which will initially be based in the Washington, D.C., suburb of Tysons Corner, Va., will focus on acquisitions of existing apartment properties, with a particular focus on the Boston, New York metro and Philadelphia areas. "We'll be looking at distressed properties, properties where we can benefit from value-add renovations and properties where the existing owners have debt maturity issues," Butz said. As for financing its purchases, the investment team will take advantage of the fact that government-sponsored enterprises Fannie Mae and Freddie Mac are still actively lending. "We'll rely on long-term equity together with Fannie Mae and Freddie Mac debt to acquire and own properties for 10 years." The firm will also be involved in property management.
Jefferson Apartment Group's development activities, on the other hand, will not be initiated until the confluence of certain fundamentals begins to take hold. "Over the next five to seven years, the apartment market should be very strong due to the recovering economy, reduction of new supply, reduction of the home ownership rate and demographic benefits of Generation Y," he noted. "So we'll pursue development opportunities as the market changes."
Although a major increase in the demand for new apartment properties is a long way off, and asset price tags have not yet hit that widely anticipated bargain-basement level, the new investment group is undaunted by the possibility of a waiting game and believes strongly that this is just the right moment to make its debut. "There will be new opportunities with changes in the market," Butz said. "The timing couldn't be better."
By: Barbra Murray, Contributing Editor
The apartment market held up relatively well during the early stages of the economy's descent--but even it is now in decline. And while many investors are shying away, industry veterans Jim Butz and Greg Lamb are jumping in with both feet. The two former principals of leading multi-family developer JPI East have teamed with office and mixed-use developer Akridge to launch Jefferson Apartment Group with the intention of acquiring--and eventually--developing apartment properties in the Mid-Atlantic and Northeast regions.
The average national apartment vacancy rate hit 7.2 percent in the first quarter, and it is on track to reach 8 percent this year, which would mark the highest level since 1980, according to a recent report by Marcus & Millichap Real Estate Investment Services. Additionally, effective rents will likely decrease as much as 5 percent. However, from Jefferson Apartment Group's perspective, there is a positive side to the grim statistics.
"We believe the market is clearly at a low point, maybe not at the bottom, but it's an opportunistic point to be in the market buying assets at advantageous prices; to start now and move forward from what is close to the bottom of the market," Butz told CPN. Butz will serve as owner and managing partner of the new firm, while Lamb will hold the positions of owner and executive vice president. "There is dislocation of the capital markets, which is creating some buying opportunities."
To start, Jefferson Apartment Group, which will initially be based in the Washington, D.C., suburb of Tysons Corner, Va., will focus on acquisitions of existing apartment properties, with a particular focus on the Boston, New York metro and Philadelphia areas. "We'll be looking at distressed properties, properties where we can benefit from value-add renovations and properties where the existing owners have debt maturity issues," Butz said. As for financing its purchases, the investment team will take advantage of the fact that government-sponsored enterprises Fannie Mae and Freddie Mac are still actively lending. "We'll rely on long-term equity together with Fannie Mae and Freddie Mac debt to acquire and own properties for 10 years." The firm will also be involved in property management.
Jefferson Apartment Group's development activities, on the other hand, will not be initiated until the confluence of certain fundamentals begins to take hold. "Over the next five to seven years, the apartment market should be very strong due to the recovering economy, reduction of new supply, reduction of the home ownership rate and demographic benefits of Generation Y," he noted. "So we'll pursue development opportunities as the market changes."
Although a major increase in the demand for new apartment properties is a long way off, and asset price tags have not yet hit that widely anticipated bargain-basement level, the new investment group is undaunted by the possibility of a waiting game and believes strongly that this is just the right moment to make its debut. "There will be new opportunities with changes in the market," Butz said. "The timing couldn't be better."
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