Trepp | The CRE Rundown – The Big Picture

It’s no secret that the outlook among professionals in the commercial real estate industry is brighter today than it was a year ago. Lenders are more readily lending: Banks are back in the game, CMBS bond spreads have tightened, issuance volumes are higher than they’ve been since the Global Financial Crisis, investor interest has increased, and the prognosis for property fundamentals has markedly improved.

That’s not to say that everything will be smooth sailing over the next 12 months. We’re still seeing heightened levels of distress and more could be on the way as interest rates remain higher than they were during the zero interest-rate period. Then there’s the perpetual economic uncertainty.

But while poring through apartment REIT filings, we noticed that they all increased their transaction activity this year. The nine major companies we reviewed—they collectively own 418,138 units—completed $6.9 billion of acquisitions and dispositions this year through September, up 87% from the $3.7 billion of deals they completed during the same period a year ago.

That alone doesn’t tell the full story. Five of the nine REITs didn’t make a single acquisition last year. This year, all but one—Aimco—completed acquisitions. The Denver company recently decided to adopt a plan of liquidation, so it’ll be selling its remaining eight properties, which have 1,029 units.

Transaction activity has increased because of strong investor demand for the types of apartment properties owned by the REITs: newer properties in major markets.

Meanwhile, properties are changing hands for what Berkshire Residential Investments estimated was 20% less than the cost to construct. That’s goosed demand for existing properties.

Camden Property Trust, for instance, said it has $800 million available under a $1.2 billion unsecured credit facility and commercial paper program. On top of that, it carries only $3.41 billion of debt against $9.1 billion of assets, giving it some borrowing capability.

In fact, Camden recently said on a call with analysts that it would not be starting any new development projects, preferring to focus on acquiring existing properties.

Meanwhile, Veris Residential, which previously planned to sell $500 million of properties this year, recently increased that target to $650 million, all because of demand.

Nationally, multifamily investment volume totaled $159.9 billion on a trailing 12-month basis in the third quarter, according to Newmark. That’s up 22.9% from the same period a year ago.

For more information, please reach out to the team at therundown@trepp.com.

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