Multifamily Deals are Starting to Fall Out

Count_Chocula's picture
Rank: Neanderthal | 2,554

Just had one of the largest landlords in the country drop a down the fairway apartment deal because they "don't know how to price risk appropriately today". Not a retrade, just a dropped deal.

Our team is pencils down for at least two weeks to see what happens. I don't pretend to be able to predict the future, but it's going to be an interesting few weeks.

Comments (54)

Mar 17, 2020

We have had brokers reach out on two deals where we were in the B&F but lost on price. Sellers got greedy with buyers who didn't have their equity or debt lined up. We like the opportunity to get another shot, but we don't know where to price them.

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Mar 19, 2020

what about single family rental on the resi side?

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Mar 19, 2020

wrong thread

Mar 17, 2020

We're still underwriting new development deals. we issued a term sheet yesterday without seeing the site...just added language saying terms were contingent on an eventual site visit. we're selling another deal that's in BaF with 9 groups but 3 dropped out due to uncertainty

Mar 17, 2020

Curious if this is specific to workforce housing product?

I'm not super active in multifamily but I would be extremely wary of underwriting a certain collection / bad debt level in workforce housing given the shutdown of service based jobs. Would be interesting to hear from MF folks how collections look next month.

Mar 17, 2020

Renovated, class A in a major metro.

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Mar 17, 2020

Will be interesting to track bad debt across product type.

Robert Clayton Dean: What is happening?
Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

Mar 18, 2020

On the development side, we're still moving along with new pursuits. Need to have a pipeline secure for after this is over, whether that's in two months or a year.

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Mar 18, 2020

how are you targeting sites/properties - are sellers pulling their listings?

Most Helpful
Mar 18, 2020
promoteseeker:

how are you targeting sites/properties - are sellers pulling their listings?

If we're buying from listings we're doing something wrong ;)

We already had a wide range of target sites. We're still staying in touch with land sellers and local economic development authorities and trying to keep the process moving along as if it everything was normal, even though it clearly isn't.

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Mar 18, 2020

Hearing debt for development is pulling back outside of local banks. You seeing that?

Mar 18, 2020
Count_Chocula:

Hearing debt for development is pulling back outside of local banks. You seeing that?

We luckily haven't run into it yet, but I've been hearing it too. Bit of a mixed response here on WSO though, luckily - some saying they're pressing pause for at least 2 weeks while others are negotiating a floor and moving forward.

Mar 22, 2020

Correct. We are trying to finance a Class A high-density surface parked deal in a high-growth secondary sunbelt market (think Nashville, Atlanta, Charlotte, Raleigh) and have had 3 out of our 5 lenders (national and regional banks) decline to offer a term sheet. These same guys would've been dying to give us 65% LTC L +225 sweetheart terms like 30 days ago.

Mar 22, 2020

Same - we are moving ahead full steam. GCs are panicked and giving lower pricing. Land sellers crapping themselves too. About to put 2-3 sites under contract.

Mar 18, 2020

Interesting

Mar 18, 2020

We think it's a great time to go into contract. Take a nice 90+30 closing period, which gets us through the worst part of the crisis, and let the Seller assume all the risk while pricing in that downside.

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Mar 18, 2020

US Govt is planning 18+ month response to COVID-19. May want to up your due diligence period.

Mar 19, 2020

Source? Or did one of your friends send you a text who works in DC and their boyfriend's uncle works at the Pentagon and said so?

Mar 19, 2020

Google "18 month covid" and a New York Times article will pop up. It's not hearsay

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Mar 19, 2020

Just did...nothing on NYT....three shady articles that say "could last up to 18 months".

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Mar 19, 2020

NYT and CNN... so shady

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Mar 19, 2020

way to google it hours later. It was literally three search results this morning

Funniest
Mar 19, 2020

charge ur phone bro

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Mar 19, 2020

They should plan for 18 months. That gets us thru next winter until we should have a vaccine.

Hopefully it takes less time to control but they 100% should plan for 18 months.

Array
Mar 19, 2020

https://www.cnn.com/2020/03/19/health/us-coronavir...
Hot of the press. Read it and weep. Then kiss the ring.

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Mar 19, 2020
Armhoo1:

US Govt is planning 18+ month response to COVID-19. May want to up your due diligence period.

I'm in NYC, where the eviction ban is for 90 days.

And from what others are posting below, the Trump Administration contingency planning is for 18 months.

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Mar 18, 2020

Anyone have insight on construction lending? What does the landscape look like?

Mar 22, 2020

See my above comment

Mar 18, 2020

Lot of bridge lenders are having their warehouse lines repriced and a few folks are just out of the market for now

Mar 19, 2020

We are getting pinched with
1. China - We have cabinets stuck in some warehouse in China that shutdown a month ago. We can't get an answer on when we will get them. With 45 units in limbo we can't wrap up construction or lease the units...
2. No Onsite Leasing - speaking of leasing, we use third party property management and they just informed us no onsite leasing, until further notice. That's a serious issue, people rarely lease sight unseen (at least in our market).

"Capitalism: God's way of determining who is smart and who is poor." Ron Swanson

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Mar 19, 2020

Debt is being pulled, investors are pulling equity, management is closing leasing offices and only doing high priority work orders, and there are retrades everywhere. Vacancy, bad debt, and concessions are all going up. Deals are done for the next month or so. Guys, we're in a recession.

Mar 19, 2020

Just wait till the rent stops coming in. The federal government is already delaying evictions. Unemployment is already through in the roof in some states.

Obviously banks know this. Not sure why they would consider lending...they'll be too busy dealing with loan workouts.

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Mar 19, 2020

Where do MF guys get the audacity to build trust with a facemask era spring coming along?

Mar 19, 2020
karypto:

Where do MF guys get the audacity to build trust with a facemask era spring coming along?

What?

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Mar 19, 2020

Very interesting times we are living in. I don't think anyone can accurately price the risk because so much is up in the air right now.

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Mar 19, 2020

pun intended?

Mar 21, 2020

To all Listing Brokers here (or anyone else) -- are sellers accepting price RE-trades? I'm doing the debt on a multifamily on a deal scheduled to close end of April and another end of May. I'm telling my client he should be going in for a price reduction...

If so, how much are you seeing off contract price? 5%? 10%?

Mar 22, 2020

doing the debt on a $5M acquisition and the seller knocked off 450k seemingly just because of the shutdown so roughly 10% for whatever that's worth

Array

Mar 23, 2020

I'm a developer at an institutional MF shop and we're basically hitting pause and evaluating all of our investments (pre-dev, development, pursuits, etc). Will be running some scenario analysis on all of these investments to determine what's the best way forward.

Echo some of the sentiment in here that it's the lending market that's going to be a major factor moving forward.

Think things are going to get pretty bleak for a few months here before they turn around.

Mar 24, 2020
Comment
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Mar 24, 2020
Mar 27, 2020