Mansard House Picture

As we continue to develop relationships and a pipeline here in West Michigan, we are happy to announce the sale of the Mansard House Apartments in Kalamazoo Michigan. Matt Jones represented both the Seller and the Buyer in this transaction, which traded for $3,700,000. This transaction was covered in the Grand Rapids Business Journal and MiBiz and MultiFamilyBiz
For more information on this sale or to speak about current opportunities or the value of your asset in today’s market, please don’t hesitate to contact us.

One of the most common questions I’m asked by property owners as I’m sitting down with them recently is, “How are rising interest rates impacting sale prices?”. The short answer is, they aren’t. Yet. In the markets that we work, there are a lot more Buyers then there are Sellers and competition for marketed deals is fierce. Buyers have not been able to dial back their valuations to achieve the same spread they would have when interest rates were 50 bps lower three months ago. (U.S. Treasury Yields) Put simply, a 50 basis point raise in interest rates has not correlated to a 50 basis point rise in prevailing CAP rates. To win the inevitable bidding war, the Buyer must sharpen their pencil and be willing to pay a premium; a lower CAP rate.

That said, I don’t think it’s necessarily a bad time to buy if you can lock in your rate long-term and can add value or are in a growth market where rising rents will make your Year 5 returns look far different than your Year 1 returns.

Matt Jones

 

Beacon Holiday Card

Happy Holidays from our family to yours!  As we head into the holidays and take some time with family, friends, and reflect on what has been and what is to come, I am incredibly thankful for everything that we’ve been able to accomplish in our short time in existence. It has been one of the most envigorating and fulfilling adventures of my life to take this little idea and propel it into a full blown business. I am chomping at the bit for 2017 to start to show the world what we’ve built here and perhaps make some heads spin in the process. Warmest wishes to all of you this holiday season and cheers to a new year filled with health, laughter, and love! We’ll see you out there!

Matt Jones

clouds, construction, crane

“Is Grand Rapids in the midst of an apartment building bubble?” “Who is going to fill all of these units that are being built?” These are questions I hear almost daily.  From meetings with lenders, to neighborhood meetings on development related topics, it is the topic du jour. It is impossible to drive around town without passing a building under construction or an existing building under renovation and with new projects being announced virtually weekly, these are valid questions.

Instead of answering the above questions based on speculation, I tasked my team with compiling the data to answer them based on numbers. Here’s what we came up with:

The Grand Rapids area is the fastest growing metro area in Michigan. From, 2010 to 2015 Grand Rapids experienced population growth of 3.7% 1. Over that same time period, developers added about 2000 new units, or an average of roughly 400 new apartment units per year. This number has increased significantly in recent years. In 2015 and 2016 alone, there will be roughly 1600 new units delivered, or 800 units per year. This number doesn’t show signs of slowing down either as our company is tracking projects that have been proposed and/or are currently under construction2.  There are well over 2000 new units in the pipeline through 2018.

As stand-alone numbers, those are a lot of new apartment units. But, consider this: The City of Grand Rapids has 37,509 registered rental units within the city limits3. Even if 1000 units are added yearly that is only a 2.6% increase in the total rental housing stock.  With population growth closer to 4%, market vacancy at around 3%, strong millennial demand, and a growing population of baby boomers selling their homes and moving back to urban centers, it’s no wonder rent in Grand Rapids has increased an average of 23% since 2011. Perhaps the more pertinent question is, are we building enough units?

 

Matt Jones

Principal, Beacon Realty Group

 

Sources:

1  United States Census  Bureau. http://www.census.gov/quickfacts/table/PST120215/2634000,26

2 Beacon Realty Group, LLC. http://www.beaconrealtygrp.com/intel/

3 As of September  23, 2016. City of Grand Rapids, Community Development, Code Compliance.

Other: CoStar, Axiometrics, Moody’s Analytics

 

World

This is an update on an article I wrote about a year ago on the same topic, regarding viewing our own market through the eyes of the world instead of just viewing it through our own lens.

We are all, naturally, products of our environment and if you’ve only done deals in the market that you exist in and only looked at deal metrics through the lens of only doing deals in that market, then it’s easy to understand the head scratching at some of the current values in the market. The perception is that the Buyer overpaid and it’s only a matter of time before they go belly up. What we sometimes overlook, are the different environments that investors are coming from and the lens with which they are able to view our market through. For example, a California investor who just sold an asset in San Francisco at a 3.50% CAP and is an exchange would look at a stabilized 5.50% CAP as a bargain, relative to the asset they just sold. They’re probably able to replicate the quality of the real estate and improve their cash flow, without increasing their equity or risk profile. Price per unit and/or Gross Rent Multiplier metrics, don’t carry as much weight, if any, to that investor.

As another example, foreign investors may be able to pay more for an asset because of tax laws in their home country, or currency exchange rates, or they could be motivated by citizenship through EB-5 investment, or they may view the U.S. as a more stable long-term investment than their home country. This is especially true with recent Brexit news and the current uncertainty surrounding European markets. There are too many reasons to list, but the point is that their lens is drastically different than the local operator looking at a deal.

Whatever the reasons, it is important to remember as you contemplate the value of your own asset, that mid-market apartment properties are garnering attention from all over the world. With that in mind, if you are making the decision to sell an asset, it is as important as ever to make sure that it is positioned in a way that it gets exposure to the correct buyer pool. In this broker’s opinion, that buyer pool is the entire world.

Matt Jones

So much of what we do on a daily basis involves analyzing data to help paint the clearest picture we can for our clients. We’re looking at rents, sale comps, development pipelines, asking rents, concessions, etc. every single day. Which is great for us and our clients when we can sit down and share what’s in our heads relating to whatever question they may have at the time. But we can’t be everywhere. So, I’ve always wanted to make at least the high level data available for public consumption, in an easy to digest format. The solution? Beacon Realty Group Intelligence (Our first post HERE) We’ll be posting interactive data maps, “By the numbers” snippets, and whatever else the minds behind the curtain come up with. If you have something you’d like to see, or a way we can make it better, please let us know.

Matt Jones

Beacon Realty Group

Hello, World. It is with great excitement that I introduce to you, Beacon Realty Group. This company is
the culmination of my working life in, on, and around apartment properties. While this company is new,
it is driven by experience and built with unwavering focus on a single mission: to be an indispensable
resource for our clients in the operation, disposition, and acquisition of investment real estate.
I am truly humbled by all of the support that we have received in the build-up to launch. To all of the
past and current clients who got us here, you are family. To everyone whom we haven’t met yet, we can’t wait to do so.

“Talk minus action equals zero.” –D.O.A.

Matt Jones
Founder
Beacon Realty Group, LLC