Property Types
Multi-Family
Jun 15, 2009
By: Barbra Murray, Contributing Editor
In the apartment market, job losses are starting to exact a high cost in terms of declining rents and rising occupancy levels, and for holders of multi-family debt and equity, there's more bad news on the horizon as loan maturities on overvalued assets begin to take hold over the next few years. In an effort to assist those facing the impending challenges, two industry veterans have just launched apartment consulting firm Caldera Asset Management, based out of Denver and Atlanta.
Behind the new firm are president and co-founder Mike Kelly, a former managing director and chief acquisition officer of Denver-headquartered REIT Dividend Capital Total Realty Trust, and chairman and co-founder Bill Leseman. Leseman, a onetime senior vice president of property management with Atlanta-based apartment REIT Post Properties, most recently served as president of apartment property management concern Atlanta's RAM Partners L.L.C., which is now a partner firm of the newly established Caldera.
Caldera points out that multi-family mortgage debt now accounts for an aggregate $875 billion, having increased $16.3 billion from the first quarter of 2008 to the first quarter of 2009. And among the various sectors of commercial real estate, the rate of continuously rising delinquencies is most prominent in the multi-family market.
Ways out are few and far between. Given the ongoing disparity between buyer and seller pricing, the opportunity to sell a property carrying a large debt for a suitable price is a rarity. Indeed, despite the fact that government-sponsored enterprises Fannie Mac and Fannie Mae are still actively lending, sales are way down. Citing figures from real estate research firm Real Capital Analytics, Caldera notes that the number of multifamily property transactions skyrocketed a whopping 230 percent between 2001 and the glory days of easy loans ending in 2007--and then plummeted 50 percent between 2007 and 2008. Additionally, generating sufficient cash flow and maintaining property values in the face of declining rents and escalating vacancies is a mounting challenge. As per a report by Marcus & Millichap Real Estate Investment Services, effective rents are expected to decline 2.2 percent this year and the national vacancy rate is on track to jump 110 basis points, spurred by the thwarting of household formation due to the deteriorating employment market, and competition from the shadow market.
The dire set of circumstances is expected to grow worse, according to Caldera, causing destruction well beyond the end of the recession. For its diverse group of clients, Caldera offers a bevy of detailed experience in the multi-family industry and extensive local market expertise. The firm's target market encompasses all those with money and assets at stake--lenders and equity investors, as well as bankruptcy and real estate attorneys in need of precise operating and valuation data--as the onslaught of loan maturities edges closer and property values continue to dwindle. "In order for property lenders, owners and equity investors to make good decisions," Kelly noted in a prepared statement, "they need to fully understand the issues with the underlying operations, sponsors, markets and financing options in a fast-shifting environment."
And the shifting is already tangible. As per Caldera, just taking REITs into consideration, approximately $17 billion of debt matures this year, followed by $20 billion, next year, and over $30 billion in 2011.
By: Barbra Murray, Contributing Editor
In the apartment market, job losses are starting to exact a high cost in terms of declining rents and rising occupancy levels, and for holders of multi-family debt and equity, there's more bad news on the horizon as loan maturities on overvalued assets begin to take hold over the next few years. In an effort to assist those facing the impending challenges, two industry veterans have just launched apartment consulting firm Caldera Asset Management, based out of Denver and Atlanta.
Behind the new firm are president and co-founder Mike Kelly, a former managing director and chief acquisition officer of Denver-headquartered REIT Dividend Capital Total Realty Trust, and chairman and co-founder Bill Leseman. Leseman, a onetime senior vice president of property management with Atlanta-based apartment REIT Post Properties, most recently served as president of apartment property management concern Atlanta's RAM Partners L.L.C., which is now a partner firm of the newly established Caldera.
Caldera points out that multi-family mortgage debt now accounts for an aggregate $875 billion, having increased $16.3 billion from the first quarter of 2008 to the first quarter of 2009. And among the various sectors of commercial real estate, the rate of continuously rising delinquencies is most prominent in the multi-family market.
Ways out are few and far between. Given the ongoing disparity between buyer and seller pricing, the opportunity to sell a property carrying a large debt for a suitable price is a rarity. Indeed, despite the fact that government-sponsored enterprises Fannie Mac and Fannie Mae are still actively lending, sales are way down. Citing figures from real estate research firm Real Capital Analytics, Caldera notes that the number of multifamily property transactions skyrocketed a whopping 230 percent between 2001 and the glory days of easy loans ending in 2007--and then plummeted 50 percent between 2007 and 2008. Additionally, generating sufficient cash flow and maintaining property values in the face of declining rents and escalating vacancies is a mounting challenge. As per a report by Marcus & Millichap Real Estate Investment Services, effective rents are expected to decline 2.2 percent this year and the national vacancy rate is on track to jump 110 basis points, spurred by the thwarting of household formation due to the deteriorating employment market, and competition from the shadow market.
The dire set of circumstances is expected to grow worse, according to Caldera, causing destruction well beyond the end of the recession. For its diverse group of clients, Caldera offers a bevy of detailed experience in the multi-family industry and extensive local market expertise. The firm's target market encompasses all those with money and assets at stake--lenders and equity investors, as well as bankruptcy and real estate attorneys in need of precise operating and valuation data--as the onslaught of loan maturities edges closer and property values continue to dwindle. "In order for property lenders, owners and equity investors to make good decisions," Kelly noted in a prepared statement, "they need to fully understand the issues with the underlying operations, sponsors, markets and financing options in a fast-shifting environment."
And the shifting is already tangible. As per Caldera, just taking REITs into consideration, approximately $17 billion of debt matures this year, followed by $20 billion, next year, and over $30 billion in 2011.
Recent Multi-Family Headlines
Aug 07, 2009
Jul 31, 2009
Jul 29, 2009
Jul 29, 2009
Jul 24, 2009
Subscribe to this blog's feed
