14A — September 27 - October 10, 2013 — Fall Preview — Mid Atlantic Real Estate Journal
www.marejournal.com
P hilidelphia M ulti - family
By Corey Lonberger, Rittenhouse Realty Advisors Low interest rates fuel PA multi-family marketplace thanks to 10 yr T- Bill
T
down making interest rates extremely attractive to apart- ment owner operators on both the acquisitions side as well as on refinances. “CAP Rates are in direct correlation with interest rates driven by the 10 year. As long as rates stay low, we will continue to see an enor- mous amount of activity in the multi-family world,” according to Corey Lonberger, managing partner at Rittenhouse Realty Advisors. In addition to the low rates, the Philadelphia apart- ment market has had the good fortune of extremely low va-
cancy rates. In the third quar- ter, the vacancy rate for the Philadelphia MSA is 3.4 per- cent according to REIS. “Low vacancy rates allow owners to increase their rents which in turn leads to higher values for multi-family properties,” said Ken Wellar, managing partner at RRA. The Phila- delphia market has seen an increase in rental rates of ap- proximately 2.8 percent when compared to rents 12 months ago. Suburban Philadelphia has very limited barriers to entry and with only a handful
of new apartment projects to be built within the next 12 months we anticipate high occupancy rates in the foreseeable future. “Suburban Philadelphia does not see the drastic peaks and valleys in regards to occupancy as other markets across the country given the limited bar- riers to entry that we have,” per Mark Duszak, director at RRA. We are dealing with al- most a fixed amount of supply and increased demand. The question lies within the City of Philadelphia where there are numerous new apartment
ing of their specific legal and structural requirements and how they will affect both the Borrower and the senior Lender are critical. It is imperative that sponsors engage counsel experienced in the nuances of this type of financing and strongly suggested they employ a financial intermediary with the requisite experience and capital relationship base to offer the best options appropriate to the sponsor’s immediate and ongoing needs. To date, much of the activity for this segment has been fo- cused on property acquisition. It can also provide redemption of equity in existing assets for contemplated property im- provements, buyout of minority partners or other portfolio needs of the sponsor. Given the large number of overleveraged legacy CMBS transactions originated from 2005 through 2007, it will likely become an important op- tion over the next few years in the refinance of those maturing transactions. In general the quality and quantity of the higher leverage options that continue to emerge are good news for both Borrowers and the Capital Markets. However these transactions, which are viable at current interest rates, will be particularly sensitive to further increases in effective rates. Edward D. Brown is a senior VP and managing director for NorthMarq’s Philadelphia Office. n continued from page 11A By Ed Brown . . . projects that are set to break ground within the next 18 months. In the previous year we have seen roughly 1,200 units come online in metro Philadelphia and absorption has not been an issue with those units renting out with relative ease. The question lies with how the market will absorb the roughly 2,500 units that are planned or proposed in the next 12 months. “This is a lot of units, and we are excited to see how the market responds,” adds Lonberger. “Given that the roughly 1,200 units that came online last twelve months were easily ab- sorbed, we are confident that leasing these units will not be an issue,” Ken Wellar said. Corey Lonberger is aman- aging partner at Ritten- house Realty Advisors. n
he Philadelphia multi- family marketplace has remained extremely
strong over the last 12 to 18 months. The driving f a c t o r f o r the activity has been the historically low interest rates fueled
Corey Lonberger
by the 10 year T-Bill. Although the 10 year has been on the rise over the last three months, it is starting to settle back
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