Local apartment owners are reluctant to sell

10/24/2001

The uncertainty that has gripped the nation following the Sept. 11 terrorist attacks is threatening to dampen the local investment market for apartments, but only because sellers are hesitant to part with sure-fire revenue generators.

“What induces sellers to sell is that there is a better place to put their money. But now, I find them putting deals on the back burner because they say, “I've got no place better to put my equity,'” said John Aubry, president of InvesTek Realty, an investment real estate brokerage based in Perrysburg.

Apartment buildings accounted for the biggest value slice of investment property sales locally last year, at nearly $31 million in purchases, according to statistics compiled by InvesTek, and through Sept. 30 of this year, $19.3 million has been spent for apartments.

Charlie LaMar, a sales associate with Michael Realty Co. in Toledo, said there are still many buyers for apartment complexes but owners who may have thought about selling are rethinking their plans.

“I own apartments that are 100 percent full and I've got guys coming down from Detroit begging me to sell,” he said. “It's tempting, but where would I take my money? Investors would love to cash out with these kinds of prices, and they're always asking me, ‘Can you find me somewhere to go?' And right now, the answer is no.”

While commercial real estate agents and apartment owners say the market locally is hot, the United States market is cooling considerably, according to the latest survey by the National Multi-Housing Council in Washington. Mark Obrinsky,the group's chief economist, said only 10 percent of companies responding to the quarterly survey said they were drawing back from areas hard hit by the terrorist attack aftermath, such as Orlando because of its dependency on tourism.

Fifty-five percent, however, acknowledged there was a weakening in the market because of the slowing economy that started before the attacks on the World Trade Center in New York and the Pentagon in Washington.

The latest report from Torto Wheaton Research, an arm of commercial real estate giant CB Richard Ellis, is forecasting a recession for the next four quarters, which it says will be deeper and longer than most other analysts expect.

The report maintains that multifamily units are usually the least affected of the major property types by a recession, but it is hurt when a slow economy means young people stay with their parents.

One of every six firms in the survey said they want to buy complexes in markets that have been tough to enter because of high land prices and development costs, said Mr. Obrinsky of the multi-family council.

Apartment owners in Toledo have been commanding premium prices lately, said Dick Smenner, broker/owner of Re/Max Central Group, Inc., in Toledo. He said he is having his best year ever in a 40-year career of selling apartments, having sold nine complexes this year valued at more than $6 million dollars. He expects to close soon on six more complexes priced at more than $11 million.

Extremely low interest rates on commercial loans - 7 to 7.25 percent from traditional banks - has helped strengthen the investment market, he said. “Another thing is, so many investors have lost money in the stock market and there's so much more stability in the real estate market, that more and more people have been wanting to go into it,” Mr. Smenner said.