Driven by small transactions in New York and California, sales of U.S. apartment properties in February were up 31 percent, according to the latest report from Real Capital Analytics. The $2.6 billion in total sales represents a 1 percent increase year-over-year. It was mid and high-rise property sales that lead the way last month, thanks in large part to a high volume of sales in New York City. The price-per-unit for these properties continued their up-trend in February as well. Garden properties weren’t as popular, however, reported at a 6 percent decrease from February, 2011. Top assets in metro areas were trading near record low cap rates last month, and across the nation apartment cap rates hit 6.5 percent on average.
Part of the reason apartments this year have been outpacing commercial properties is the improvement in financing from government agencies which began in 2011. During the second half of last year, Freddie Mac and Fannie Mae increased their originations and accounted for 65 percent of mortgage volume. But local and regional banks were stepping up their pace last year in the multifamily sector as well, especially in the Northeast. After Freddie and Fannie, the number three lender in 2011 was New York Community Bank. Rounding out the top five apartment lenders for 2011 are Wells Fargo and HUD. And not far behind them was Sovereign Bank and M&T, also centralized in the Northeast.
Insurance companies also made some headway on the market share of the GSEs. While they have largely ignored the tertiary markets for multifamily loans, they have increased their activity on Class A properties in major metros and secondary markets. In some cities, they were very generous lenders. Forty eight percent of all apartment loans in Portland, Ore. last year came from insurance companies. And they accounted for 20 percent in Orlando and 18 percent in Houston. The most active market for private loans, by far, was Washington, D.C., where it accounted for 9 percent of the total. The average percentage for other major U.S. cities from private lenders was only 1 percent.
According to the RCA’s report, financing for value added and repositioning projects is still hard to come by, but insurance companies and banks have become more active in giving out construction loans.