Dive Brief:
- Apartment sales rose 34% year over year to $13.5 billion in May, though “the headline figures for the apartment sector mask underlying weakness in the market,” according to a report that data firm MSCI Real Assets shared with Multifamily Dive.
- Apartment prices dropped 1.5% YOY in May, marking the eighth month of declines according to the RCA CPPI, a measure of apartment prices. The annualized pace of monthly declines averaged 4.7% in April and May, indicating further deterioration in the market. Cap rates remained at 5.6%.
- May’s strength was driven by the closing of the Veris Residential privatization deal, which was the first multibillion-dollar entity-level deal to reach the finish line since 2024 closed, according to MSCI.
Dive Insight:
In February, Veris Residential joined the parade of small multifamily REITs that have recently sold out, with the Northeast-focused firm agreeing to be acquired by an investor consortium led by Affinius Capital in partnership with Vista Hill Partners in a $3.4 billion all-cash transaction.
The transaction had a broad impact across a couple of apartment subtypes.
Individual asset sales, the bedrock of the apartment transaction market, dropped 14% YOY to $7.4 billion in May. Portfolio and entity sales jumped 311% YOY to $6.1 billion, powered by the Veris transaction, according to MSCI.
Garden-style apartment sales dropped 28% YOY to $4.2 billion, while mid- and high-rise sales were up 121% to $9.3 billion on the strength of the Veris deal, according to MSCI.
The market may be tough right as the 10-year treasury pushed above 4.5% May before falling. The last time it hit that mark was 2024, when deal volume was in the midst of a 20-month decline, according to a separate MSCI report shared with Multifamily Dive.
Still, some apartment owners see an opportunity to find deals. For instance, Morgan Properties, the No. 2 apartment owner in the country according to the latest National Multifamily Housing Council Top 50, remains very active.
“We tend to have a longer-term time horizon,” Greg Curci, chief operating officer of Morgan Properties, told Multifamily Dive. “We're not a fund that has urgency to invest the equity and then return it within five years.”
From an underwriting standpoint, Morgan generally models a 10-year hold, which gives it time to weather the market ups and downs.
“When you have that time horizon to look out upon, it takes some of the pressure off of having to really time the entry point perfectly,” Curci said.
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