Here’s an excerpt from an interesting article about the underlying economics of multifamily / apartment and commercial real estate assets. The sentiment of the panel echoes much of what we see in the current market for rental apartment buildings, in that the lack of financing for many residential borrowers is set to push rents in many markets nationwide. We continue to remain bullish on apartment loans, especially for multifamily developments of 100 units or more, and encourage sponsors seeking apartment financing to visit our Apartment Loan site or call (800)290-4770:

Panel Dishes on Subprime Meltdown, Recession

Property FundamentalsBrian McAuliffe, chief investment officer for Rreef Alternative Investments in North America, is very bullish on apartments. Speaking on a panel discussing capital markets and investment trends, he said existing tenants are staying in their units longer because of the subprime meltdown while new renters continue to enter the market.

“Obviously (given those factors), we’re confident renewal rates will be increasing,” he said. “The shadow effect of excess (single-family housing and condominiums competing with the rental market) will occur only in select markets.”

Looking further out, he says there will be more garden apartment construction because the lack of for-sale housing will bring down the price of drywall and lumber prices.

The office sector will remain steady due to the inherent value of their leases, he says, and while the heretofore strong warehouse-distribution market may slow down a bit, it still presents a solid opportunity for the smart investor.

As for the retail sector, McAuliffe says “it’s a market we feel has peaked early and one here you have a lot of supply threats existing today.”

Daniel Hurwitz, president/COO of Developers Diversified Realty, sees the retail sector completely differently. “The supply pressure in retail doesn’t mean it’s overbuilt, it means it’s under demolished,” he said. “If you look at vacancy rates they move a little but not very much; that’s because most retail projects have 10% or less of spec space, it’s all done on a build-to-suit basis.

“When we have a situation where we are taking tenants from other projects, (it’s because) that other center is obsolete and needs to go away, which isn’t the case for the apartment, industrial and office markets. So do we need to get more aggressive in how we reposition (retail centers) or take them offline, that’s something all good companies do on a regular basis. But overall, if you look at demand, it far outstrips supply.”

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