COMPLEX MARKET
Apartment investors keep flying to safety in Oklahoma City
As long as real estate investors see apartment properties as a flight to safety, buyers and sellers will keep smiling all the way to the bank, or at least to the Buhl next acquisi
tion — if they can find one.
That' s according to Mike Buhl of Normanbased Commercial Realty Resources Co ., in his midyear multifamily market report.
After years of sustained investor interest, a pp reci at ion, rent er demand and construction, with only pockets of overbuilding in the Oklahoma City area, "There is not much to dampen enthusiasm in the market ," Buhl wrote in the report, available at http://www.crrc.us.
The robust investment market has been great news for both buyers and selle rs, whichever side of a deal they' re on, he said, but success is making it harder to find the next purchase with similar potential return.
"Many potential buyers might consider a pause before assuming they can squeeze much more value on the acquisition side. Equally, many potential sellers may be showing some pause as well. That's because even if they can get a good price in today's environment, after the sale is done, they may not be able to find another property to buy. Being able to redeploy capital is an issue for a lot of investors at this stage of the cycle," Buhl wrote.
Pricing is becoming more difficult to settle on, he reported.
"Buyers are probably shifting more to underwriting that is based on current performance, whereas sellers are holding to the belief that underwriting is based on results going forward. Meaning, if the offering is labeled value add, then the seller wants the buyer to pay for it up front," according to the report. "And there is really no indication that sellers are ready to lower their prices.
"For buyers, the biggest opportunities may come with having patience. Buyers that make uninformed decisions with aggressive pricing will have uncertain results. Even discerning investors can rationalize stretching on their underwriting assumptions to help make a deal. Suffice it to say, eager money typically pays too high a price."
In the meantime, Buhl reported, "Buyers are keeping their foot on the gas in terms of acquisitions" with many looking for off-market properties — t hose not actively being offered for sale. "There was a lot of this in 2018 and we think 2019 is likely to bring more of the same."
Sales stats
•In the first half of 2019, there were 19 sales of properties larger than 25 units for a total of 2,792 individual apartments, down from 4,428 units sold the first half of 2018.
• Sales volume was $215.8 million at mid year, up from $162.4 million the first half of 2018.
•The overall average price per unit was $ 77,312, more than twice the average of $36,687 at midyear 2018, but the average this year was driven by the sale of four large institutional-grade properties that comprised 51% of the units sold and accounted for $ 156 million of the total volume.