The Immunity of Multifamily
Health of apartment sector remains strong despite ills of market
By Richard H. Zahm, founder and principal, Second Angel Bancorp
For lenders, investors and
brokers, the multifamily market is
one relatively bright spot in real estate today. Despite the malaise that seems
to be covering real estate lending in its
entirety, multiple signs indicate that apartments are enjoying relative health.
This health could be a reflection of a
much larger trend, changing the way that
people live in the United States, fostering
an even-greater opportunity for commercial multifamily lending.
In general, prices of multifamily properties
are up. Although prices of office properties
dropped 0.2 percent between June 2007
and June 2008, according to the Standard
& Poor’s/Case-Shiller Commercial Real Estate Indices, multifamily gained 3. 6 percent.
Compared to the rate of decline in the
single-family-residence market — down
14.1 percent nationally from the first quarter of 2007 to the first quarter of this year,
according to the Standard & Poor’s/Case-Shiller Home Price Indices — actual price
appreciation is all the more remarkable.
Sales of multifamily properties have
increased in areas that have shown distressed single-family conditions. For example, on the West Coast, two major
markets have seen multifamily-sales increases: Sales for the second quarter of this
year increased 32 percent in Los Angeles
and 27 percent in San Francisco, compared
to the first quarter.
In general, occupancy rates also are up
in the multifamily market. Again, this isn’t
true in all areas across the country. But it’s
telling that hard-hit Tampa, Fla., is experiencing an uptick. The area’s occupancy
rates and rents increased in the first two
Richard H. Zahm is a founder and principal of Second Angel Bancorp. He leads
the firm’s investor relations as a manager of Second Angel Commercial Mortgage
Fund I LLC, a real estate focused hedge fund. A California attorney, he earned
degrees at Colorado College, Stanford Law School and the Graduate School of
Business at the University of Cape Town in South Africa. He holds a California
real estate broker’s license. Reach him at (916) 863-7300.
quarters of this year after record lows in
2007, according to ALN Apartment Data.
Multifamily-building permits also
have increased in several areas. In California, for example, building permits for
multifamily projects are showing an upswing in select markets. The San Fran-cisco/San Mateo area had 25 percent
more multifamily permits pulled in the
first two quarters of this year than in
2007, and Santa Barbara/Santa Maria is
up 40 percent, according to the California
Building Industry Association.
Loans for multifamily properties are
available, despite the credit crunch. Earlier
this year, Fannie Mae and Freddie Mac expanded their multifamily presence. Despite
their entering government conservatorship in September, that trend is expected
to continue. The t wo provide funds for the
purchase of multifamily properties, buying
individual loans and pools of loans from a
list of lenders that follow Fannie and Freddie guidelines.
As this has occurred, Fannie and Freddie have been demanding higher returns from lenders in exchange for buying
loans that help finance rental-apart-ment buildings. Since the beginning
of the year, Freddie has increased rates
as much as 0.6 percent to buy multifamily loans.
Through June of this year, Fannie
bought $18.2 billion of these loans from
lenders — the most it has acquired from
this group in the first six months of any
year. Freddie bought $8.3 billion of multifamily loans during this same period, a
49-percent increase from a year earlier.
Some of this is attributable to the pull-back of lenders in this space. But multi-family investing have been one of the few
areas where Fannie and Freddie are actually turning a profit.
An urban trend?
Another large factor in the multifamily
market’s future is the idea that owning a
home is no longer as sound an investment
as it once was.
We’re all too familiar with the depressing figures of the past two years: Of
the approximately 80 million houses in
the nation, 55 million have mortgages.
From 2005 through ’07 alone, more than
22 million U.S. residents bought either new
or existing homes. According to Moody’s
Continued on Page 42
If you think earning a
is out of reach in this market, ...think again!
THE BANKS HAVE STOPPED LENDING,
but you can have the ability to make the loans
that businesses so desperately need.
You can make 5%-8% commissions on
business loans up to $3,000,000
GLOBAL CAN DO IT ALL!
� Equipment Leasing
� Accounts Receivable Financing
� Commercial Equipment Financing
� Church Financing Program
� Commercial Bridge Loans
� Business Acquisition Financing
� SBA Loans
� Easy Pay Cash Advance
WE SPECIALIZE IN BANK TURNDOWNS
We are looking for a few select brokers who want
to earn a high income in the lucrative field of
non-real estate commercial financing.
Call today for an interview with our president Phil Dushey,
to see if you qualify to start earning a high six-figure income.
email@example.com - www.globaleasing.com
A full service financial company
Servicing the financial
community for over 30 years.
as low as Prime + 3 Nationwide
All Types of Commercial
Acquisition & Development
Business Loans with or
without Real Estate
Back-end Referral Fees Paid
Residential Brokers, take advantage of our Training and Commercial Lending tools.
We will make the conversation easy and extremely profitable!
90% Commercial Financing is Still Available
Commercial Financial Group, LLC
Call today | New Business Development: 877-340-2228
Training and Tools: 877-340-2228 ext. 201 | Email: