The Institutional Angle: Why So Many Larger Investors Sell (and Buy) Off Market

Posted by Greg Cooper J.D. on Sep 30, 2021
Greg Cooper J.D.
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As we at Offerd have said before, and as known by other leaders in industry, perhaps half of all multifamily acquisitions take place off market. That means there’s usually no public listing of the property, none of the complications associated with a standard brokerage process, and never a bidding war that ends badly. We’ve covered why property owners go off market (hint: for different reasons, both buyer and seller come out ahead); how the Acquisitions-as-a-Service process is uniquely suited to enabling Principal-to Principal (P2) transactions; and served up examples of ongoing and completed deals. We’re rightly proud of tracking more than 90,000 off-market assets around the country at any given time. When investors partner with us, they find that a lot of the hard work is already done—every search is shorter, better focused and more successful.

 

But given that Acquisitions-as-a-Service is still an emerging market—we modestly see ourselves as pioneers—it’s understandable that many potential investors still have questions. Here’s an important one: What types of assets can be found in this nationwide database?

 

To be blunt, is looking for off-market properties like rummaging through a multifamily bargain bin? Are they only assets that belong to aspiring investors who made bad choices? Are they mostly distressed properties?

 

As in the real world, a treasure trove this size features considerable variety; we track properties of all shapes, sizes (and prices) around the country, and we have options to suit any kind of acquisition strategy. From A-class new build urban core assets in primary markets, to workforce housing in Las Cruces, NM. But here’s one aspect that might surprise even some industry veterans: Many respected investment houses with extensive resources now routinely engage in off market transactions. In fact, from our experience, the pattern isn’t fading, and the numbers may even be rising.

 

These asset owners are typically sophisticated investors who keep their eye on the big picture and play the long game—they buy entire portfolios, which sometimes include random properties that may not fit a particular strategy. They might be in a different region with different economic priorities, or require a major overhaul to ensure a profit, or just be outside of their prototypical holdings.

 

Think of these as orphan assets—getting them off the books makes sense in both the short and long term, and gives the owners more latitude to focus on the rest of the portfolio. The owners definitely want to hit a number, but they’re also reasonable—dragging out the process really doesn’t make sense in the short or long term.

 

That’s when the advantage of going off market—and partnering with an Acquisitions-as-a-Service provider to enable a Principal-to-Principal transaction—is the perfect alternative. There’s no elaborate marketing campaign that reaches few qualified buyers, no tours for strangers, and definitely no intrusive but mandated access to financial records.

 

We ensure that the multifamily property owner sees much less friction—no wasted marketing campaign, no unserious buyers, no visits from strangers seeking to tour the property (potentially upsetting tenants or management), no invasive access to financial records, no extended marketing and sales timeframe of three to six months. In our case, it’s more like two to three months. Every prospect is vetted, approved and engaged, with low overhead and no broker fees. The entire process is undeniably faster and cheaper. Every prospective buyer is vetted and engaged, the absence of broker fees helps the bottom line, and it all happens much faster.

 

We’re working with an investor right now in exactly this situation. It bought a bulging portfolio with a few random properties that didn’t fit their investment strategy. Offerd entered the picture, made a connection to the right buyer(s), and the arrangement is working out very well for all parties. We’ll have details down the road.

 

One last point: The larger institutions are not only on the sell side—we’ve noted before how it’s an open secret that some equity partners don’t allow acquisition fees for marketed properties. That means they do all deals off market.

 

Again, this is just a sampling. Off market represents true variety—and more than just off-market assets, we analyze data around occupancy rates, demographics, local employment, school districts and more. There’s genuinely something for just about everyone.

 

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