Are any of you multifamily guys buying in Las Vegas right now?

Noskyhigh's picture
Rank: Orangutan | banana points 350

I am seeing a lot of 90's-00's vintage assets hitting the market right now in Vegas at what seem (at least to me) to be very rich pricing and I am wondering who is buying the stuff. Personally, I have a hard time understanding how people are going to make any real money on a sub 5 cap in Vegas right now where I can't imagine rent is going to keep on growing.

Today I was looking at the book from a group raising equity for a sub 5 cap, 2005 construction MF asset, and they were projecting a 20%+ IRR over 5 years. Crazy to me.

Hoping to get the thoughts of someone with more knowledge than me on the subject.

Comments (20)

Apr 11, 2017

Vegas is big leagues now, they're got an NFL team.

Apr 11, 2017

So does green bay wisconsin

Apr 12, 2017

They've also got hotter hookers than Oakland. Only downside - unfortunately Vegas hookers typically still have their teeth.

Apr 12, 2017

So what does that make LA now that they have a football team?

Apr 11, 2017

were they really underwriting continued crazy rent hikes? I think Vegas product will leave you quite exposed in any blip over the next 24-36 months.

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Apr 11, 2017

That's exactly how I feel, especially with floating debt and preferred equity.

Apr 11, 2017

Is this just stuff you're seeing on loopnet?

Apr 11, 2017

Haha no, broker blasts

Apr 12, 2017

The fundamentals in Vegas are still very, very strong. Rents still have room to run when compared to pre-downturn levels. We are being selective simply because we already own a lot of product there, but are absolutely still buyers in the Las Vegas market.

Apr 12, 2017

I'm 4 hours from Vegas...

All us San Diego MF guys look at Vegas as Boom-Bust for sure. Very fitting for such a town. You really have to know each street. In the downturn a buddy of mine was living in a 200 unit building that had 90% vacancy.

When it's good in Vegas it can be very good. When it's bad, it's horrendous.

Apr 12, 2017

It isn't a target market for us due to boom bust nature, and we don't really want to take cycle risk on it. Pasting some useful data below.

Top 10 Buyers (past 24 months)
1. Bascom Group
2. Oaktree
3. Westland Industries
4. TruAmerica Multifamily
5. Guardian Life Insurance
6. Security Properties
7. Carlyle Group
8. Greystar
9. Continental Realty Advisors (CRA)
10. Roxborough Group

Top 10 Owners
1. Bascom Group
2. Westland Industries
3. The Siegel Group
4. Oaktree
5. Olen Properties
6. 3D Investments
7. Pacifica Cos
8. Wolff Company
9. Picerne RE Group
10. RMI Group

Apr 11, 2017

thanks for posting! same concerns here & we avoid.

100 bucks says "Very Very Strong Fundamentals" @bd.charlus works at bascom.

Apr 12, 2017

So I take it you disagree with my assessment that the fundamentals in Vegas are still strong?

Apr 12, 2017

Not who you responded to, and my sentiment is totally anecdotal and rooted in my perception of it from the last cycle. That said, I am open to the notion that things will continue to go well there, but I would be interested in reading some analysis that supports the thesis that long term growth there is possible and sustainable. Again, I have done a grand total of 0 deals there and don't know the market. Is the economy diversifying away from just being a major tourism hub, if so I guess I can see opportunity.

Best Response
Apr 12, 2017

Here are a few. It's interesting that you mention that your sentiment is rooted in your perception of LV from the last cycle. The fact that many institutional investors are still haunted by this has reduced competition and allowed us to add to our portfolio at what we feel are very attractive prices.

*LV has one of the highest job growth coupled with rent growth rates in the country, trailing only Raleigh, NC and Orlando, FL. Only Phoenix is projected to experience more rapid employment growth through 2018.

*Unemployment has been steadily declining since 2010 and currently sits at 5.1%.

*The median single family home price peaked at $306,000 in 2007 and has recovered to $217,000, which is still 29% below peak.

*I don't have the up-to-date data in front of me, but as of 3Q2015, Vegas multifamily values were still 26% below the prior peak, compared to a national average of ~35% ABOVE peak. I think they're something around -24% now.

*The Las Vegas economy has been shifting away from strictly tourism and gaming. There's been over $7B in recent tech, infrastructure upgrades, and medical development.

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Apr 12, 2017

those are value-add deals i'm sure - they're renovating. they buy based on a pro forma cap rate, not current/in-place ...

Apr 15, 2017

anyone see Phoenix as booming