Highlights from 'Buying and Selling Multifamily Housing: Getting the Deal Done'
There was a lively discussion at our recent seminar “Buying & Selling Multifamily Housing: Getting the Deal Done.” Speakers Ed Murn (Managing Director and Head of Residential Division of WRIT), Frank Relihan (Senior VP and Senior Director of NorthMarq), Julie Smith (President of Bozzuto Management Company), Sharon Nelson Craig (Chair of Lerch Early’s Real Estate Transactions group) and moderator Larry Lerman (Chair of Lerch Early’s Commercial Lending group) discussed the state of the multifamily market and current thinking about buying, selling and managing multifamily housing. Highlights included:
- Location remains the #1 factor in choosing properties. There are many more desirable neighborhoods in the DC metropolitan area than there used to be, both new DC neighborhoods like the U Street Corridor and “urban suburban” neighborhoods like Clarendon.
- Supply and demand. Right now, there is too much supply in the multifamily market. For the next 24 months, there will continue to be an oversupply, although there has been more absorption than expected in the past 12 months. However, while it will take two to three years for us to get back to equilibrium, the long-term demographics of the DC metropolitan area look good because of job growth and continued influx of young professionals.
- Affordability. There continues to be a lack of affordable housing in the DC metro market; however, when parents are helping millenials with rent, affordability is less of an issue. We also are seeing more roommate situations—two bedrooms going to roommates instead of families.
- Borrowers need experience. While rates remain historically low, lenders are concerned with the overvaluation and supply of properties, and are becoming tougher on the need for borrowers to have experience managing multifamily housing, particularly in specialized contexts like university housing.
- Right of first refusal. Out of town developers and investors often are surprised by the right of first refusal laws in this area that require owners to give tenants or the government the first opportunity to buy. While prices generally are too steep for local governments, tenants often leverage these laws.
- Mixed Use. Mixed-use projects create opportunities and challenges for the multifamily developers. Tenants love having the convenience of retail in their buildings until either noise, odors or crowds impact their home life. Balancing becomes a challenge.
Sharon Nelson Craig is a real estate attorney at Lerch, Early & Brewer in Bethesda, Maryland with over 25 years of experience in commercial real estate transactions and development. Sharon combines her experience in office and retail acquisition, development and leasing, with commercial and residential vertical or horizontal subdivision and development to represent developers in a variety of transit-oriented and public/private mixed-use projects. Larry Lerman is a commercial lending and real estate transactions attorney at the firm who focuses on acquisitions, sales, leasing and financing for businesses and individuals from many sectors, including banking, real estate developers, professional service companies, and nonprofit and religious organizations. For more information about multifamily housing, contact Sharon at (301) 841-3836 or firstname.lastname@example.org or Larry at (301) 657-0163 or email@example.com.
Pictured L to R: Ed Murn, Washington Real Estate Investment Trust; Sharon Nelson Craig, Lerch, Early & Brewer; Larry Lerman, Lerch, Early & Brewer; Frank Relihan, NorthMarq Capital; and Julie Smith, Bozzuto Management Company.