Seems that industrial and multifamily have weathered the COVID storm better than other property types (as has been the case historically). Perceptions seem to be that distress (i.e. buying opportunities for opportunistic/value players) will be focused in retail/office/hospitality (for obvious reasons).
That being said, have heard from several West Coast value-add acquisitions contacts lately that their respective firms are "out of the market" when it comes to value add multifamily (this is the main strategy for these firms). Combination of COVID underwriting assumptions (negative to zero market rent growth for the next 12-18 months, concession loss, etc) and pricing not really adjusting that much due to COVID, and I keep hearing that bid-ask is too wide, and very hard to model a 3-5 year hold hitting value-type returns unless pricing comes down. In Los Angeles, I have personally seen several decent sized "value" deals being listed/sold at pricing I cannot wrap my head around. i.e. a vacant building needing capital for both deferred maintenance and upgrades, on a broker's proforma (which we all know is inflated) showing a stabilized cap rate of 4.5-4.75%. And deals are being closed at close to list price. Unless these are simply long term hold investors who are happy with 25-50bps of cap rate enhancement in exchange for taking on a ton of work?
Just curious what others are seeing/hearing/experiencing in the market, relative to value add strategies in multifamily.
