Why are RE Funds Paying Way Over Value in Select Markets

[Michael Tempel]

First off....I am taking a short break from the Minneapolis, MN market. Outside investors are paying beyond a premium and I am seeing long term hold investors sell like crazy. I am not talking about single family portfolios, but 100-2000 unit portfolios.

That does not even consider development! My favorite is "222 Hennepin Apartments" they created an amazing space (great job, love the leadership in that company), but quickly realized they needed to move on. The numbers are extremely tight in new construction, especially downtown Minneapolis. It is obvious they wanted to exit quickly at a premium and I believe it is a superior product that should sell at an extremely high rate.

My point is....there are tons of funds that have excess capital and nothing to do with it. THEY SIMPLY WANT PROJECTS....THE COOLER THE BETTER.....but....THEY DONT MAKE GREAT RETURNS.

I like to make 15 to 30% returns....these Chicago, NY and other fund mangers are happy to make 8% on your money. God Bless them. I cannot wait to buy back these properties, it is obvious that they are taking the easy route now, but will be in a heap pile of crap when they realize they don't understand what they bought at a premium.