Who's building multi-families (20+ units)?

Question

Who's currently developing multi-families from the ground up right now - 20+ units?  I'm curious about your story, numbers, strategy etc.  Your input is appreciated!

Chris Winterhalter · Answer

I wanted to bump my post, I'm curious if anyone is developing multi-family projects (ground up) right now.  Cap rates have compressed even further since my initial post (Oct 13).  If so what do the numbers look like?  Are you penciling the deal with low debt, strong rent growth (expected), & appreciation?  Are you infilling the development where supply is constrained?  Or are you a developer looking to sell out after you stabilize?

Joel Owens · Answer

I am not but I am curious about your project.

Here where I am at there is too many properties you can buy for way less than replacement cost.

Until that is absorbed over the years it really doesn't make sense to build new unless you had a location for strong demand and little inventory.

Nick L. · Answer

Most cities are seeing an apartment boom right now. There is a big movement to urban infill over suburban garden apartments. Even in my third tier city of Milwaukee, WI there are thousands of new urban units being developed. Bigger cities are going even more nuts.

I am doing one such development. I believe mine will succeed even in a tougher market because of a combination of pricing, unique position, aesthetic appeal and some other qualitative factors that set it apart. But of course every developer believes that! I am underwriting conservatively in the expectation of an overbuilt market.

Patricio Tellez-Giron · Answer

@Chris Winterhalter sorry for jumping in like this on an old post, with a completely unrelated topic haha! but, does any of the hotel rehab work you've done has been to turn a hotel into residential apartment units? If so, you should/MUST (please), post about it!

If not, how about a hypothetical..? I am by no means trying to give you homework, I'm just curious about how you would go about doing so, or if it even makes sense.

I ask because a good friend of mine owns a hotel chain and he is constantly gets offers to purchase hotels of all types, including the typical small economy hotels in blue collar areas.

Chris Winterhalter · Answer

I've seen a fair amount of larger (100+) multi-family developments going up in and around downtown areas in larger cities the past year.  Almost every large city I've been to this past year (probably 10 downtown areas) has had a mulit-family development underway or just completed.  The developers are mainly large local or regional players though.  The progression of our recovery (CRE) has obviously made sense - The top 5 to 10 major cities have recovered first with Large Class A+ properties in A+ areas (CBD's) being picked up first.  Then it slowly starts to spread out to coastal areas, A-/B+ properties, the top 25 MSA's etc etc. I really feel like I've seen the progression in our country mainly because I've been very fortunate to have traveled a lot over the past 5 years.

@Joel Owens @Derek Carroll I think you are both right about the absorption and replacement cost comments.  The supply needs are very localized like Derek pointed out.  I'm just very curious to see who has been experiencing these supply constraints and who is deciding to build new supply.

George Paiva · Answer

Around here in the northeast if new build they generally are townhouse / condo style.  I haven't seen any multi's being built under one roof that are 20+.

I've seen a few mixed use ones where they put a few apts in the upper floors but again many are focused on the townhouse / condo setup.

I am actually working on a deal with a 3 plex that is on a double lot.  I hope to fit 5-6 condos on each lot making it 10-12 units.  But will only build of they will come.  So trying to get the contract with just the 3 unit revenue in mind.

Who's building multi-families (20+ units)?

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