Saturday, October 19, 2013

What types of multifamily assets are investors seeking in Jacksonville?

In past posts I have discussed how and why the Jacksonville apartment market is exceeding analysts’ expectations. The result has been $388.8 million of apartment sales transactions ($1 million plus per transaction) in the first seven months of 2013. Current apartment performance and the expectations for future performance are driving a relatively active market. 

According to REIS, for transactions during 2013Q2 the median cap rate was 7.2% and the mean was 7.8%. Those numbers are up from the 12-month rolling averages of a 6.8% median and a 7.3% mean. The respective 40 BPS and 50 BPS increases are largely due to rising interest rates. Thus, sellers are motivated to take advantage of current conditions with improving NOI's avoiding the risks of new construction entering the market and rising interest rates pushing cap rates up further. Inventory is being made available across a broad range of apartment class types, and property ages and situations.

So multifamily sales ($1,000,000+) during the first seven months of this year have been a combination of opportunistic purchases (about 40%) and asset lifecycle transactions. Transactions of both types have been across all asset classes. Most of the transactions have been in Jacksonville's Southeast quadrant where most of the employment growth is occurring. However, a number of the opportunistic purchases occurred on Jacksonville's Westside where older properties had been sold or refinanced prior to the recession and then ran into difficulties when vacancies rose and rents remained flat. Purchasers’ plans for their acquisitions will be discussed in a future post.

If you would like to discuss these thoughts in more detail, please contact me:
            Paul B. Hazlett
            Multifamily Investment Advisor
            Coldwell Banker Commercial - Benchmark


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