Greg Cooper J.D.
July 29, 2022
The multifamily investment discipline has emerged from the worst of the pandemic with admirable strength and resilience. Even heading into a recession, with a series of shocks to the economy roiling commercial debt markets, we continue to see significant opportunities to capitalize on ongoing market shifts.
However, as the go-go days of the last few years give way to a whole new market dynamic, brokers have needed to adjust their approach to getting deals done. Gone are the days of setting a market-leading price as guidance, sending out an OM to a database of sponsors, and waiting for 30 to 50 offers to come in above guidance.
While great for sellers, this scenario involved a significant amount of effort: touring more than half the groups that offer, weeding through the offers to select a handful to bring in to a best and final process, and negotiations to ensure maximum pricing within the tightest timeframe.
The brokerage community has long relied on unique characteristics: interpersonal relationships, familiarity with specific markets, the right mix of strategic and aggressive marketing, negotiating skills, fierce competition, and more. But even before the recent challenges, the landscape for brokers was changing.
The availability of online data, both raw and refined, has undermined the advantages stemming from personal knowledge of particular markets. While previous environments encouraged competition, the landscape today demands collaboration. Of course, there’s no denying that the very act of listing multifamily assets is undergoing turbulence (in our estimation, half of all multifamily trades now happen without a full marketing program). Many large transactions routinely take place at the Principal-to-Principal (P2P) level; we are all aware of major investment groups that pass on publicly listed properties and seek alternative avenues for deal flow.
Just a few months ago, the on-market environment was highly competitive. We would easily see assets in primary markets receive more than 30 offers. But now, as we recently noted, bidders are down by as much as 75 percent. Assets built in the 1960s and 1970s are even less competitive, particularly in secondary and tertiary markets. In some instances, brokers have marketed deals fail to meet even reduced pricing guidance.
Again, new challenges bring new opportunities, forcing the creation of new operating models. That’s Offerd.
At Offerd, we’re doing something new: Our Acquisitions-as-a-Service model encompasses refined data, the latest technologies, a nationwide approach, and targeted outreach to curated lists of off-market assets that our partners want to own. We work extensively with brokers around the nation as part of our overall strategy. We can be competitive with on-market deals, we can be a conduit for pocket listings, and we can facilitate softly marketed deals (shown only to a few qualified buyers rather than a broad campaign).
We’re seeing the current challenges play out because, increasingly, brokers are bringing us deals that failed the marketing process or deals that fell out of contract prior to closing. They know we have many qualified partners on the platform and understand how we can be the ultimate buyer in the marketplace. We have developed equity and debt solutions that allow us to be competitive (even in a rising interest rate environment).
In summary, despite the current challenges, Offerd is still pencils up and making competitive offers on on-market, off-market and softly marketed assets.
So, brokers, keep us in mind. We’re solid buyers in every economy, and we can partner at every level.