I’m excited to announce that Flywheel Equity is growing! Austin Sine is our new Director of Acquisitions and will be responsible for identifying and securing new multifamily investment opportunities. Austin is a proven commodity given his work landing Morris Manor and is already hard at work identifying your next opportunity. Austin is an experienced commercial real estate broker having worked with national retail brands assisting in their site selection analysis, deal sourcing, and negotiations. Welcome, Austin!
Given his vantage point, I've asked Austin to give us a sense of what he's seeing in the market. Here's what he has to say:
State of the Market
"Deal activity has been relatively stagnant. As pandemic-life lingers, so do the unknowns.
We are still definitely in a seller’s market. One that is ripe with owners not interested in selling or, if they are, still expecting pre-pandemic premiums. Cap rates remain compressed due to low interest rates and resilient rent collections across property classes.
This spread in pricing has caused a stand-off. Multifamily hasn’t taken quite the hit everyone expected due to government stimulus. Sellers are looking backwards seeing minimal damage to collections and buyers are looking forward to more potential rough waters.
Major brokerage firms (i.e. CBRE, Cushman & Wakefield, etc.) have even dipped their toes into boutique sized (sub-50 units) deals in effort to keep capital churning. This was unheard of 12 months ago and further increases competition in the market.
Despite this competitive climate, we are making progress. Most of our activity is coming from local brokers who we've built deep relationships with over the last several months"
Acquisition activity has slowed as we come into the final months of the year and are still dealing with the effects of COVID on the renter population. Still, we continue to reach out to potential sellers and engage with our existing broker network.
Graham NC Pairing
Here’s one example of a property we’ve looked at recently. It’s an off-market pairint of a 28-unit and 16-unit property in the town of Graham, NC which is very close to the 12-unit we already own on the corridor between Raleigh-Durham and Greensboro.
The 28 unit is next door to a class-A new build apartment (seen in blue in the background above) and about one minute from the entrance to the highway that takes you to both Greensboro and Durham. This is a great location for workforce housing and the nearby apartment provides a good pricing comp.
Similar to many other towns in this area, Graham is experiencing growth almost twice the national average and has an underdeveloped rental supply. This continues to drive rent growth even in challenging economic times. Combine this favorable supply and demand dynamic with an opportunity to improve outdated units and you have an excellent investment on your hands.
We are engaged with the seller, but these off-market deals can often take some time to fully develop. We’ll continue discussions and let you know if we're able to reach a conclusion.
Our latest acquisition, the 51-unit Morris Manor in Greensboro NC, is undergoing the initial stages of our renovation plan. Just to give you a sense of what we started with, here are some before pictures of our first unit interior:
And here is how it looks after we renovated the entire unit and are starting to utilize it as the leasing office:
We are also currently engaged in the following projects across the property:
- Bringing online four other units that were in an unrentable state
- Rehabbing three vacant units to our new interior standards for market rate listings
- Redoing all electrical outlets and breaker panels
- Trimming all landscaping and trees
- Fixing an irrigation issue in the rear of property
- Beginning metalwork repair on stairs, railing, and patios
As you can see, this is the very definition of a heavy value add property! Despite all this work, we are operating within our budget and are excited to start getting these first units on the market in the coming weeks.
Our 12-unit in Mebane, NC continues to be an outperformer in the portfolio. We’ve never had a missed rental payment and remain fully occupied. We are exceeding proforma projections by a large margin and our biggest issue is in getting tenants to move out so we can execute our rehabs!
Our 16-unit property in Fayetteville, NC continues to outperform on rental rates, even while we have had to deal with a few problematic tenants and some one-time big ticket expenses. We believe we have most of the issues behind us and look forward to ending the year strong.
Multifamily in the News
Greensboro and Fayetteville NC are both top 10 in the list of markets with the greatest rent growth according to a November 12th report from Real Page.
We have definitely benefited from this dynamic since we have properties in both metros and believe affordable markets will continue to show strength throughout the coming years.