Acquisitions Professionals - Any Activity?
Just wanted to check in with my fellow acquisitions people to see if any one is doing anything.
Feb 28, 2023
Feb 28, 2023
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Comments ( 41 )
I'm with a developer in Southern California. Haven't put out an LOI since last November. Will obviously peruse a deal if it makes sense, seems like sellers are still hung up on 2021 values. I think they'll come around in the next couple of months.
Yeah I hear you. In their mind, if they settle on price, they're basically admitting they overpaid in 2021.
Which is what 70% of aggressive buyers did. Going to be a hard pill to swallow
Starting to see more OMs from the brokers but the seller/buyer pricing stratification has not corrected, yet.
I've signed up 3 deals in the last few months, but that's because we're super rifleshot approach and have 2-3 years before we design and deliver any of our projects. I imagine if I was at my old shop doing marketed multi acquisitions I' d be churning through underwriting and not hitting on anything in months.
Nope, haven't done a deal since the beginning of Q4 last year. Continue to underwrite, but on the MF side LPs want deals that pencil 5.5% caps with 8% cash flow by year 3, and are very specific on the markets they will look at. Tough environment to raise equity.
8% stabilized CoC? What markets are penciling to that with new debt placed today?
Very VERY nice loan assumptions
We have historically invested in the sunbelt, and yes, 8% CoC by year 3, or a cap rate of 8% if capex is still going on. Haven't found a deal like that even with assumable debt.
We've put out a handful of LOIs over the past year and gotten one under contract, but strictly bidding on highly opportunistic, primarily off-market deals. Our development pipeline is also on hold except for stuff that was far enough along to have most of the pricing bidded out.
We have been actively modeling deals that we source off market with a couple going to LOI and pending PSA with rather attractive cap rates. Other than that, we are only looking at assumable debt deals or pref equity contributors at this time.
About 20 LOI's since the beginning of the year currently have one under contract.
Just curious - for your LOI process, are you fully vetting the deal? Or you throwing preliminary numbers and will dig in deeper once you get to IC?
It's impossible to fully vet a deal pre- due diligence period! And even then, there are usually a couple of happy mistakes that slip through.
When we send out an LOI we have already toured it, full UW, comps , talked to third parties (tax, insurance, debt, etc), and discussed at IC. You should be able to move on deals you like within 48hrs.
Ok
I couldn't imagine going to IC pre-LOI. Seems crazy to me and then do you have to explain why you lost these deals at the bid stage? lol
Difference between market and off-market deal. When you are a top buyer in a specific market you will be doing deals over text messages a rent roll and a T12. There is no need for some redundant IC memo.
We don't have a formal IC pre-LOI submission, but we run all deals we're submitting an LOI on by IC members to ensure they like it at a high level. Avoids us wasting time on deals which wont make it through IC.
I'm not calling you a liar, but I don't see how this is possible to get all this done within 48 hours at 90% of firms. . Even if the underlings and peasants (aka analysts - aka myself at my old firms) pull all nighters, there's usually a principal slacking. Slacking by either putting off meetings, delaying important decisions, making changes to underwriting assumptions and presentation materials last minute, etc. Maybe I worked for the wrong people who were already super rich and were way too conservative, but I'm sure many will echo my thoughts. However, I do know they won't be going bust in the next downturn so I guess that's something to hang your hat on.
Few things. My firm is truly vertically integrated, so we have everything from in-house PM to construction. Secondly, we only focus on a few markets. Because of this, when brokers send us a deal there is a good chance, we: a) own an asset in the area, b) gone full cycle on an asset in the area, c) have used it as a comp before. This gives us actual data to pull upon to make decisions. We don't need some pointless IC memo or meeting where people with no idea what the fuck is going on try to justify why they are on payroll by arguing about Costar reports.
How many of these 20 LOI are the typical class C value add garbage multi deals that brokers bombard me with lol
Zero, better broker relationships = better deals.
Multifamily REPE . only one deal closed since beginning of q4 across entire country.
Closed one in Q4 - VA industrial in a core market. Motivated seller so got the retrade needed to make the deal.
Have submitted several LOIs this year... Came close on a couple but market is just too sloshy rn.
With core funds and ODCE funds facing redemptions, pricing is under serious pressure. Opp / value funds are liquid because of the close ended aspect but long gone are the days when core accounts stretched for what we'd typically characterize as a value deal.
So what? Frozen market with a lot of stubborn sellers and unincentivized buyers.
Good time to sip drinks in the Caribbean IMO
Developer of core+ assets in Europe and we have placed a handful of bids but in general land is too expensive to hit our return hurdles. Lots of rejections, not sure how others are uw to hit their bids bc they look overpriced (or have low returns or have amazing financing or will go bust idk). Construction costs are coming down but rents aren't moving as far as we would hope despite low/no vacancy. Current strategy is try get land owner into a promote deal. Waiting for some distressed stuff but honestly we have not heard of much yet. Hoping for some Q3 activity.
Zilch
Industrial and residential development here. Tons of opportunities, most are Vendors who are hanging onto prices from over a year ago. Starting to see discounts on really great real estate, so we are getting aggressive
Value add office & residential - zero deals since Q3 2021.
How are you still employed?
Because I'm not 100% acquisitions - I'm on the development team which handles acquisitions, asset management and capital markets.
I'm working like crazy...blood in the water is opportunity! We're mainly office investors so lots of people are looking to quietly unload under distressed circumstances. Also preferred equity or mezz debt in newer office developments that can't refi and need capex to stabilize. On the MF side, there's distress as variable rate deals that traded at 4% caps move underwater as rent growth doesn't pan out like proformas thought. I've been churning out tons of UW in 2023.
Multifamily acq - haven't been sending out a ton of LOIs, we've mostly been working on the same handful of deals for the past 6-12 months. We've actually had a couple deals fall out of contract then went back under contract once we found equity (and with a significant price reduction), one of which just closed. Takes a realistic, motivated seller for sure.
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