Multifamily Remains Ripe For Investment

Leaders at the National Multi-Housing Council (NMHC) discuss the year to come.  Block Funds makes first apartment purchase; seeks to acquire 1,500 units in 2013.

Leaders in the apartment business from across the United States and Canada met last week in Palm Springs, California to discuss the state of the industry and economy as well as trends in apartment operations, development and investment. The meeting included a conversation with Earvin “Magic” Johnson about his experience as an entrepreneur in many urban communities. When asked about his approach, Johnson said, “You prepare so much when you are an athlete. I took preparation from basketball into the board room.”

Another highlight of the meeting included a discussion between NMHC Chairman Tom Bozzuto, Senator Alan Simpson and Erskine Bowles, former co-chairs of the National Commission on Fiscal Responsibility and Reform. The pair pointed to five major causes of the US debt crisis, including healthcare, defense, social security, an inefficient tax code and compounding interest on existing debt. Bowles called the issue “the most avoidable economic crisis in history,” but pointed out that, “the problem is real and the solutions are painful.”

Apartment investors celebrated a strong year of investment activity. At $90 billion, apartment sales nationwide were up $25 billion from 2011 and approaching pre-recession investment levels. While the focus for many large national REITS remains on buying Class A properties in the Gateway Cities (Boston, DC, Miami, NY, San Francisco), the theme for private investors in 2012 was searching for higher yields in smaller markets, Class B or C properties, or value-added transactions. Jonathan Holtzman, CEO of Village Green, discussed the opportunities in the Midwest, saying, “Historically, the Midwest was for the single-family market. However, the opportunity is that you have young professional people who want to live in the cities, but the cities haven’t built any apartments in years.” Increased interest has evidenced itself in higher transaction volumes and lower cap rates for cities such as Indianapolis, Kansas City and Minneapolis.

New apartment development was another major theme at the conference. In 2012, new development was up to 212,000 new rental units with expectations of deliveries reaching 300,000 to 400,000 per year over the next several years. However, concerns about overbuilding were minimal as economists pointed out that the United States historically has experienced new construction of about 300,000 units annually to keep pace with demand. Demand is also expected to be strong due to 1.7 to 2.0 million of pent-up demand from renters who have doubled up during the recession or “Boomerang Kids,” defined as adult children living at home with their parents. Still, it was noted that the overall economy will have the largest impact on household formation and renter demand so developers will be watching the number and location of new jobs carefully as they make new development decisions.

Overall, the conference outlook was positive for both apartment investment and development over the next several years.

Block Funds recently acquired The Settlement, a 396-unit luxury apartment home community located in Kyle, Texas, part of the Austin MSA. The Settlement is a Class-A community completed in January 2012 that features many of today’s modern amenities, including a resort-style swimming pool pictured here. The new construction also provides maximum unit efficiency, attractive floor plans, walk-in closets, top-quality finishes and appliances and detached garages. The Settlement is located along I-35 near several major retailers, universities and a new medical center, providing employment, education, dining and entertainment options for residents. The outstanding amenities and location enabled The Settlement to complete its lease-up in less than 10 months, demonstrating strong demand for quality rental housing by young professionals. Block Multifamily Group (BMG) has assumed the management of The Settlement and will continue to operate the property on behalf of Block Funds.




The Settlement--396-unit luxury apartment home community

Block Funds is a full-service commercial real estate investment platform that specializes in helping high net worth investors preserve capital, generate cash flow and build wealth.

Block Multifamily Group provides multifamily management services in the Midwest and Southern United states with a focus on maximizing net operating income and creating long-term value in market rate and affordable housing properties.

Block Funds and Block Multifamily Group are both services of Block Real Estate Services (BRES), a full-service commercial real estate firm with brokerage, management, development, construction and investment expertise. BRES is headquartered in Kansas City, Missouri, and is responsible for 22 million square feet in 38 states.

Contributing Author:

Aaron Mesmer,
Investment Sales & Acquisitions
Block Funds
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