Finding The Diamond In The Rough
As many of you know, DXE Properties aims to purchase a few compelling deals in any given year. To get there, we are constantly underwriting potential acquisitions and submitting offers. Each year we screen over 500 deals, underwrite over 100, and submit offers on at least 50 opportunities.
These potential acquisitions come from various sources. Marketed deals from large brokerages, marketed deals from sole proprietor brokerages, off market; from brokers, owners, property managers, lenders, etc. Over the last 18 months or so, the few deals that have been closing have been the marketed ones. This is largely because the bid-ask spread has been so large that it would take both a motivated seller and a market of offers to truly find price discovery in an illiquid market. In past newsletters, we have discussed the 1 trillion dollars++ worth of expiring debt. This upcoming wave of debt expirations will force transactions to occur, in contrast to an otherwise quiet marketplace. From a multifamily perspective, the financial (debt driven) distress is likely going to be centered around tough assets but not exclusively -- there will certainly be opportunity.
Recently, we experienced a shift in seller sentiment, we are getting more calls about off-market deals once again. There are plenty of reasons for purchasers and sellers to transact off market. For a seller who knows what price and conditions they would transact at, they can preview their deal while not exposing it to the market if they can’t hit their number. For a purchaser, its an opportunity to hit a number without the broader market exuberance pushing the price up. Seeing these opportunities is not enough however. Maintaining relationships with the brokers in particular is what will allow them to truly advocate for you and get a deal done. For these reasons, we maintain strong relationships with not only the larger ‘name brand’ brokerages but with smaller shops throughout our target investment areas.
In our most recent webinar, we sat down with Chris Yeagle, owner of EastGate Multifamily. Based in one of our favorite markets, Charleston, SC; Chris has been in the brokerage community for 20+ years. Chris’ great success has endured because of the strong relationships he has developed over the years. He offers a compelling perspective and provided great conversation points around the state of the multifamily market.