A year ago, the phrase “cautious optimism” was a popular forecast for 2011, a middle ground between the hangover of a nasty recession and the hope inspired by improving fundamentals. As values and access to capital continue to improve, however, multifamily professionals are starting to drop the caveat from that phrase. New developments seem to break ground every day; value-add deals are returning to vogue; and acquisition activity is heating up well in advance of the typical fourth-quarter busy season.
“We’re obviously bullish that we’re at the beginning of a development cycle, so we’re putting a lot of time, energy, and resources there,” says Jay Hiemenz, CFO of Phoenix-based Alliance Residential. “And the cap rate compression, coupled with better fundamentals, has made deep renovations feasible again.”
It’s no wonder, then, that Alliance has a development pipeline of around 5,000 units and expects to acquire about 2,500 units this year. And the company’s value-add business is growing as well: It’s currently working on a $45,000-per-unit rehab of a 40-year-old community in Rancho Palos Verdes, Calif., looking to move rents by $750 a door.