1st Quarter Report
March 30, 2023 – Bloomfield Hills, MI
IPO is pleased to announce our 2023 multifamily investment sales through Q1 for the Midwestern markets we serve. Overview statistics coupled with a current market outlook are shared below. The YTD numbers are in stark year-over-year contrast, as the market adjusts to 9 consecutive Fed funds rate increases, our volume is down 75%. As the price discovery mode of the market settles, we expect sales to pick up next year as many “wait and see” investors will take assets to market, especially if we see a dip in rates in late 2023, as predicted by many experts and analysts. Deals are still getting done as fundamentals are outstanding and the cost of capital is still cheap from a historical perspective.
The first quarter closed with over $43M in transactional volume. This represents 11 investment sales transactions, reflecting 613 units in total.
Notable transactions include:
Sherwood Heights, Detroit, MI: 313 Units $20,500,000 / $65,495
Washington Place, Clinton Township, MI: 96 Units $8,375,000 / $87,240
Shaker House, Charlotte, MI: 46 Units $3,010,500 / $65,446
Renaissance, Pontiac, MI: 56 Units $2,010,000
Hillcrest, Plainfield, IL: 60 units UNDER CONTRACT
Bevonne Court, Dayton, OH: 16 units UNDER CONTRACT
The biggest challenge that multifamily investors are facing is the volatility of the capital markets and how that impacts valuation and transaction forecasting/strategy. The aggressive monetary policy currently being undertaken by the Federal Reserve has made clear they are willing to create havoc in capital markets in their determined effort to get inflation to an “ideal” 2% range. The impact of debt rates increasing by upwards of 50% over a 12-month period is hard to overstate with unprecedented increases over such a short duration. But such is the response when the money supply is expanded by $3 trillion to account for a global pandemic. IPO believes that data will continue to post that convinces Mr. Powell that no more rate increases are needed by what was already scheduled for 2023, and that market activity will pick up again once the “ceiling” is set, and the market bets on rates continuing to come down as inflation eases and perhaps drop significantly to help alleviate a mild recession. Indeed, the recent bank failures and signs of market distress have given the Federal Reserve a new reason to back off; the downside of increasing rates eclipses the downside of consumers paying more than the Fed would like for gas and eggs. The stakes are too high. The operating fundamentals of multifamily investment remain outstanding, and plenty of equity and debt is still chasing the preferred asset class for commercial real estate investors. We believe that any active purchaser right now is getting a “discount”, and this period will be short lived once rates come back down and as rents continue to grow. Active buyers in 2023 will be rewarded for their efforts. And while valuations are down, sellers are still able to command attractive values, especially for well-located assets.
We would like to thank our clients for entrusting us with your multifamily investment brokerage needs. Ee are a brokerage that is made up of nimble and creative problem-solvers who navigate deals in challenging landscapes to closings, even in this unique market cycle. We strive to be the best brokerage in the apartment industry and reflect it in everything we do. Our goal is to build partnerships that stand the test of time, deliver significant value for our clients and, in the process, help in creating generational wealth.
Income Property Organization (IPO) offers customized brokerage and related services to a broad range of clients – both private owners and institutional investors – that are participating in the purchase or sale of multifamily assets. To learn more or inquire about multifamily investment opportunities, contact IPO at 248.932.0300