Already extremely tough to get anything to pencil in this environment, but with inflation back on the rise and treasuries responding in kind, looks like continued gridlock.
My firm has underwritten 85 multifamily deals this year and we continue to lose out to large discretionary funds and family offices dropping large amounts of cash. Curious as to how others are doing out there.
Same issue, seeing ~150bps of negative leverage on most multifamily deals. Nothing pencils at that level. Some buyers are long term holders, others must be getting more aggressive on rent growth and exit caps, or others are simply solving for lower returns.
I am still optimistic that the second half of this year will be more active. Loan extensions coming due, would-be sellers realizing what value is today and finally capitulating, fund timing pressures, etc.
Yup, I'm seeing groups go sub 5 cap on deals buying solely on basis. I'm trying to stay optimistic and share your viewpoints about forced selling over the back half of the year, especially with where rates are today.
I think with these cycles it just takes time for people to mentally accept the reality, suburban garden 80s deals are just not worth $275k+ per door anymore. Once that reality sets in, you will see more sellers meet market. As for distressed situations, i think most of them were mitigated by lenders being flexible, but that flexibility cannot go on forever.
Swapnil Agarwal disagrees with you. 80s garden in Atlanta is the future!!!
I think many groups are betting that yes we are going to have sticky inflation which means rent growth + replacement cost increasing so they feel really good about the basis buy even though it's negative leverage. I think they are also betting that 5 years from now inflation will finally be coming in and thus rates / cap rates can stabilize lower before they exit even if it doesn't happen for 3 or more years.
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