Sunbelt Multifamily cap rates

For those that have remained active, where are you seeing Class A/B apartments across the Sunbelt trade recently?

Starting to see some pretty compelling discount to replacement cost stories. However, even at pricing ~25% off the peak, still not a very attractive story in terms of cap rates relative to cost of debt for first 2-3 years (assuming floating debt if you believe then SOFR curve).

Saw a deal recently that was around 5.25% t3/t12 tax adjusted. Is that consistent with what others are seeing? How are you all thinking about whether it makes sense to buy or not?

 

I keep using the phrase "I need to readjust my eyes", because I'll see a deal with a price per pound that looks really good, but when you model it out the returns are still garbage. If you want to be in the eating sardines business and not the trading sardines business, I think you need to be hitting a stabilized ROC in the low 7%'s. Not many deals are getting there right now. 

 

Looking at a deal now at a 5.25% tax adjusted. these sunbelt markets have a lot of in-place loss to lease so you can convince yourself you can bring that 5.25% to a 5.75% pretty quickly. Still doesn't feel good. 

 

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