MULTIFAMILY FINANCIERS continue to struggle to define value and get a handle on the strength of local markets.

Often, today's cap rates can't be taken at face value, said panelists at the 2010 Apartment Finance Today Conference.

“I've seen a lot of secondary and tertiary market activity where an institutional investor takes over and sells the property with seller financing, with terms much lower than you'd find anywhere else and higher leverage,” said Dave Valger, director for New York-based RCG Longview. “So the cap rates adjust. At the end of the day, it's not really appropriate to just look at cap rates.”

But a more inscrutable issue is the shadow market of single-family rentals. Reliable data on this segment is difficult to come by, yet lenders often require a shadow market analysis before they get comfortable with a deal.

RCG Longview has come up with a strategy when trying to underwrite condo deals: identifying the top six brokers in a market, collecting the brokers' projected inventories, and then using third-party research to keep trends in check.

This wrangling over value has given an edge to local investors. “It probably creates the most opportunity for those looking locally, who know the product, know the fundamentals, and know the market really well,” said David Rifk ind, a principal with Los Angeles-based George Smith Partners.