Multifamily packages have always been big business. Investors find these packages very interesting, as there is a lot of money to be made in them. According to Jonah Engler, there have historically always been two key types of investors that are particularly interested in multifamily properties. The first are the “junkies”, those who are addicted to the of buying and selling homes, getting a huge rush whenever they can sell a property for a profit. The second group are those who have great financial security and aren’t prone to risk, therefore. However, over the past year or so, this division between the two seems to have changed, with a third group starting to become interested, being the group of unreliable investors.
Jonah Engler on Unreliable Investors
Engler has been quite concerned about the fact that unreliable investors are now approached for huge multifamily investments. Developers seem to move towards those who are facing investigations and allegations by FINRA, or brokers and investments firms that have significant debt against their name already. This could spell disaster for the market as a whole.
There has been a lot of broker jostling, but it seems that, in New York in particular, there were some real problems in the multifamily market in 2017. In fact, it only hit $7.22 billion, which, although a lot of money, is the lowest it has been since 2011. Various financial reports have shown that there has been a 48% drop in the market. There were, in New York, just 457 trades, which is the lowest it has been since 2010. Yet, at the same time, prices stayed high and this is one of the key reasons why the first two standard investors are deciding to go elsewhere.
There are some real ups and downs in the market, which is nothing new. However, it is as if people are expecting that a crash will soon happen, but that is something they have now been waiting for, for a very long time. Yet, at the same time, it seems as if nobody has multifamily portfolio anymore. Not too long ago firms such as Corney Realty Group, Heller Realty, and A&E Real Estate Holdings would make multifamily deals worth millions of dollars. In fact, in 2015, they spent $300 million on a single deal. Additionally, that same year, Stuyvesant Town-Peter Cooper Village was purchased by Blackstone Group and Ivanhoe Cambridge for $5.3 billion.
Of course, that figure is an extreme. But there is a real drop in the segment of between $100 and $200 million. It seems investors are now only interested in the movable packages, which are worth between $10 and $20 million, a significant drop. Some are actually hoping that there will be a market crash, something that causes the industry as a whole to hit rock bottom. Because in so doing, there will be a level playing field again. Jonah Engler, however, doesn’t sign up to this, rather believing that there is a new wave of optimism in the market.