After a 16-month run of posting near weekly acquisition gains in what was practically a non-transactional environment, all has been quiet in the non-traded apartment real estate investment trust (REIT) sector for a couple of months. Major non-traded multifamily apartment REITs such as Dallas-based Grubb & Ellis Apartment REIT and Dallas-based Behringer Harvard Multifamily REIT I have not announced significant asset buys since March, even as their traded peers begin to grab properties and look at ground-up development.

“It is a very competitive landscape for acquisitions now,” says Jay Olander, chairman and CEO of Grubb & Ellis. “To counter that, we’re looking for off-market transactions directly from owners and brokers. We have a seasoned underwriting, acquisition, and management team in that regard: 50 percent of our properties have been bought off-market to avoid the competitive bidding process.” Grubb & Ellis' last acquisition was the 216-unit Bella Ruscello Luxury Apartment Homes in Duncanville, Texas—a deal that increased the REIT’s portfolio size to 14 properties in Texas, Virginia, Georgia, Tennessee, and North Carolina.

“Demand among investors flush with cash is putting downward pressure on cap rates,” says Behringer Harvard chief administrative officer M. Jason Mattox. “This has been witnessed in the high profile broker-driven marketing of a number of assets and publicized institutional acquisition of high quality assets on both coasts. It appears that the market is tightening and competition is increasing.” Behringer Harvard last announced a multifamily acquisition on March 19, the 131-unit Lofts at Park Crest in Tysons Corner, Va., which rounded out the Multifamily REIT I portfolio with investments in 23 apartment communities in 11 states comprising a total of 6,296 units.

With publicly traded REITs and larger private owner operators beginning to indicate a return to development as cap rates drop and cost of replacement equalizes, non-traded REITs could see some alleviation at the bidding table. Looming CMBS maturities through 2011 also have the non-traded sector looking to both raise and deploy investor capital into multifamily assets. “We are in the process of raising a $1 billion offering that is currently on the market and have only raised about $170 million, so we are only about 17 percent into our fundraising right now,” Olander says. “We think it is an excellent time to raise money and acquire property, and we are leveraging 60 percent to 65 percent as we look to build about a $2 billion portfolio over the next 18 months or so.”

Behringer Harvard will likewise look to keep the pedal to the metal on apartment acquisitions throughout 2010. “We continue to believe that the growing positive demographics among Echo Boomers and empty nesters contribute to a favorable multifamily investment environment,” Mattox says. “When properties boast the right fundamentals of location, build quality, and amenities, they are very attractive—even as competition increases.”