Multi-Housing News - April 2009 - (Page 15)

The single-family home “shadow market” is often mentioned as a competitor to professionally managed apartment communities. Clear evidence of significant multifamily rental losses to vacant homes has not been substantiated. The fragmented singlefamily offerings, scattered nature of the product, and issues of maintenance, insurance, and capital needs may temper the ultimate demand for singlefamily homes by “professional renters.” The investment market still likes certainty and predictability from the government. With government’s role escalating daily and the fluctuating money going to loan guarantees and stock purchases, the market is hesitant to make any long-term commitments or decisions. Once the government commits to a plan and brings clarity to the amounts headed to each industry, the market will price those commitments, and distressed funds will begin the process of moving the vast amount of transactions that must be transferred from bank balance sheets and TARP programs into the private sector. Most buyers and sellers are in a “wait and see” mode. Sellers are hesitant to dispose of product in a down market, and buyers are reluctant to purchase if they think the price will continue to drop. Eventually, though, buyers will take the risk based on simply underwriting the properties’ current initial stream of cash flows and the return they generate based on the risk-adjusted return on other investment opportunities. With the downside of generating an attractive initial yield on cost and not betting on large “back-end” weighted financial returns, cap rates are approaching a level where buyers will enter the market. The current financial carnage, while virtually halting all transactions, will present the deepest and most fundamental buying opportunity since 1990. Cap rates will reflect positive leverage based on deliverable debt. Required equity will escalate. Current cash flow will be a reality and sustainable. The glory days of financial engineering and maximum leverage have ended. Tom Flood is executive vice president and Mark Johnson is associate at Colliers International’s Multi-Family Advisory Group. One team, twice as strong. Multifamily Capital Wachovia is now part of Wells Fargo. Together, we deliver an unmatched multifamily platform with the most comprehensive ﬁnancing alternatives available, backed by a legendary reputation for strength and stability. Our customer relationships continue to be at the forefront of what we do. We look forward to strengthening our current relationships and developing new ones. wellsfargo.com/multifamily Recent Transactions To comment, e-mail diana.mosher@nielsen.com. MHN ONLINE Sign up for MHN’s Finance & Investment digital newsletter at www.multi-housingnews.com/newsletters ©2009 Wells Fargo Bank N.A. All rights reserved For more information, visit www.multi-housingnews.com/productinfo www.multi-housingnews.com | April 2009 15 http://www.wellsfargo.com/multifamily http://www.wellsfargo.com/multifamily http://www.multi-housingnews.com/newsletters http://www.multi-housingnews.com/productinfo http://www.multi-housingnews.com

Table of Contents for the Digital Edition of Multi-Housing News - April 2009

Multi-Housing News - April 2009
Contents
From the Editor
Executive Insight: Sue Ansel
Finance: Fannie Mae & Freddie Mac
Quote of the Month
Market Forecast: Texas
Profile: Affordable Developers
Operations: Green Laundry Rooms
Technology: BIM
Kitchen & Bath: Tile Installation
Perspective: Doug Bibby, NMHC

Multi-Housing News - April 2009