Why Large, Institutional Investors Continue to Scoop Up Multifamily, and You Should Too

Yet another of the nation’s largest asset managers and private equity players - KKR - recently spent $2.1B on more than 5,200 apartments.

This follows Blackstone’s $10B acquisition of Apartment Income REIT and Brookfield’s $1.55B acquisition of 7,000 apartment units.

Why the seemingly sudden foray into multifamily? There are 3 main factors:

Significant slowdown in supply. After a record building spree during the low-interest rate era, multifamily construction starts have fallen significantly. As history shows, when supply slows and demand steadily increases, rents go up.
Opportunity to buy at a more attractive basis. Interest rates are likely staying higher for longer, and higher rates mean apartment owners aren’t able to sell the same NOI for as much as they could before rates started climbing. It also means that refinances are more difficult to execute without putting money back into the deal. Well-capitalized buyers can offer sellers an out while securing the assets at an attractive basis.
One of the few options available. With markets at all time highs, expensive debt dampening PE activity and inflation taking longer than anticipated to subside, there aren’t many options for large asset managers to deploy their enormous war chests. Multifamily real estate is one of the few corners of the market that many view to be under pressure, or even bottoming out. Plus, it offers steady cash flow / yield, and as mentioned before, a relatively attractive basis.

So, what does it mean? For us, it means deals that make sense are harder to come by, but when they do materialize, they’re very good.

And for you, it means that any deals we send out are likely to offer an attractive option to alternatives.

Reach out to discuss more, or book time to chat here.

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