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I was at the NMHA strategies conference this past week. There was a wide variety of people in attendance from many locations around the country. Besides a slew of large brokers, there were lenders, equity players many large apartment owners many of them were REIT's.
I networked as much as I could and feel like I got a lot of information.
For starter, it sounds like there is a lot more distress in the market than is commonly known and talked about. The theme of the conference was change.
My investment strategy will change slightly as a result of new knowledge.
I still have some more investigating to do on this topic but, I learned that many REIT's cannot buy right now. There is an issue around "mark to market" that revalues their portfolio in a rising cap rate environment. My change in strategy will be to piggyback on these issues and work to buy directly from these REIT's. They are selling. I want to buy. Sounds like a match. :banana:
If anyone has more information on this "mark to market" dilema, please pass it along. Otherwise, I will post more information on this as I learn.
I have been looking to purchase distressed properties for years. The problem has always seemed to be that the discount available on the properties does not cover the money that it takes to repair and recover lost income during this hold period. In other words, not cheap enough. I have been able to find properties that just need management tweaks without the heavy work for rehabs. The money made appears to be equivalent with less risk.
I have also been leaning towards nicer locations. The distressed properties are rarely in nice locations.
The word on the street is that a lot of very large apartment owners have gone under or are going under. I have heard of some of these deals. Either the assets are junk or I can't get to them. They are going to people with much deeper pockets.
The big buyers are usually either REIT's or equity buyers. The equity players are sitting on the sidelines and reaching in to scoop some of these great deals that are out of my reach. They are very actively seeking commercial notes at deep discounts.
Many see the writing on the wall for the overlevereaged. Those that bought when 95% money was available. Now they will need to refinance and can only get 75% LTV on reduced values.
All in all, many of the apartment transactions were being aided by high leverage and a large supply of equity money enabling borrowers. Now the equity players are in a different game.
What does this mean to me? DEALS! I am seeing great product in very strong locations at reasonable cap rates. Not a lot mind you. Most people that can afford to hold on are doing so. But, there are some great deals out there. REIT's are some of them. To top it off, not a lot of buyer competition.
I plan on taking advantage of this situation.
Of course, there is a lot of junk on the market. Most of this junk seems very overpriced for what you get. It carries a lot of risk as well as difficulty in financing.
I talked to lenders that said they are slow to foreclose right now. One example given to me was a lender owned property that they were trying to sell cheap. The question they posed to me was: "Do I sell it at a deep discount to the note for cash or carry the loan with another borrower?". The answer became, " I don't want it back from the next guy in two years so I will sell it at a deep discount".
One other thing to note here. I went with a long time friend and associate of mine that owns 2000 units. As we talked to these potential equity players, large banks and other owners, we presented a combined face of 3000 units. We were the absolute smallest players that we talked to.
Wow.
I networked as much as I could and feel like I got a lot of information.
For starter, it sounds like there is a lot more distress in the market than is commonly known and talked about. The theme of the conference was change.
My investment strategy will change slightly as a result of new knowledge.
I still have some more investigating to do on this topic but, I learned that many REIT's cannot buy right now. There is an issue around "mark to market" that revalues their portfolio in a rising cap rate environment. My change in strategy will be to piggyback on these issues and work to buy directly from these REIT's. They are selling. I want to buy. Sounds like a match. :banana:
If anyone has more information on this "mark to market" dilema, please pass it along. Otherwise, I will post more information on this as I learn.
I have been looking to purchase distressed properties for years. The problem has always seemed to be that the discount available on the properties does not cover the money that it takes to repair and recover lost income during this hold period. In other words, not cheap enough. I have been able to find properties that just need management tweaks without the heavy work for rehabs. The money made appears to be equivalent with less risk.
I have also been leaning towards nicer locations. The distressed properties are rarely in nice locations.
The word on the street is that a lot of very large apartment owners have gone under or are going under. I have heard of some of these deals. Either the assets are junk or I can't get to them. They are going to people with much deeper pockets.
The big buyers are usually either REIT's or equity buyers. The equity players are sitting on the sidelines and reaching in to scoop some of these great deals that are out of my reach. They are very actively seeking commercial notes at deep discounts.
Many see the writing on the wall for the overlevereaged. Those that bought when 95% money was available. Now they will need to refinance and can only get 75% LTV on reduced values.
All in all, many of the apartment transactions were being aided by high leverage and a large supply of equity money enabling borrowers. Now the equity players are in a different game.
What does this mean to me? DEALS! I am seeing great product in very strong locations at reasonable cap rates. Not a lot mind you. Most people that can afford to hold on are doing so. But, there are some great deals out there. REIT's are some of them. To top it off, not a lot of buyer competition.
I plan on taking advantage of this situation.
Of course, there is a lot of junk on the market. Most of this junk seems very overpriced for what you get. It carries a lot of risk as well as difficulty in financing.
I talked to lenders that said they are slow to foreclose right now. One example given to me was a lender owned property that they were trying to sell cheap. The question they posed to me was: "Do I sell it at a deep discount to the note for cash or carry the loan with another borrower?". The answer became, " I don't want it back from the next guy in two years so I will sell it at a deep discount".
One other thing to note here. I went with a long time friend and associate of mine that owns 2000 units. As we talked to these potential equity players, large banks and other owners, we presented a combined face of 3000 units. We were the absolute smallest players that we talked to.
Wow.
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