McQuaid Commercial Real Estate Brokers

Agent representation - does anyone care?

noreply@blogger.com (Michael McQuaid) — Fri, 06 Jan 2012 19:05:00 +0000

I have been wondering if anyone actually cares who represents them in a transaction. In the selling of apartment building it is often one of the biggest pieces of an investors net worth, yet often the agent selected to represent them in the sale is simply a relative or the agent who cold called them the most often. It is amazing to me that when investors are so careful for so long that they default to the easiest or friendliest path when it is time to exit, as if there is no discernable difference between agents.

Maybe the investor could take the time to seek out the most qualified representative. There are too darn few agents in Seattle who put the interests of the client first and who are qualified to understand and deal with many of the difficulties and nuances involved in getting a sale closed. Maybe at least ask for references first.

Announcing the sale of 424 Apartments

noreply@blogger.com (Michael McQuaid) — Fri, 23 Dec 2011 22:55:00 +0000

We closed the sale of a 15 unit apartment building yesterday. It is a great example of how a fairly priced, decent condition building can fair in todays market.

This is a building built in 1963 and while it did not have any real deferred maintenance neither was it some renovated jewel-case. It was simply an average condition building with average size units in the North Capitol Hill neighborhood in the middle of a decent block with about 50% parking. In other words, nothing special.

As usual when we market a property we immediately broadly marketed the building, putting it into CBA, on our web site, and generally co-brokering with any and all interested agents. Within about a week we had five offers, several of them at the asking price. The top offer came from an out of town buyer who offered to complete due diligence within five days and close all cash within 21 days. A truly extraordinary offer.

The impetus for this property coming to market was an unsolicited offer that was for $225,000 less than we were able to get by actually bringing the deal into the light of the open marketplace, despite assurances from the agent representing the offer that the seller could never do better.

In the end, the property traded for $140,000 per unit, $215 per foot, 12 times the gross rents, and a 5.19 CAP. Certainly no steal but evidence of how a property priced decently and broadly marketed can attract a lot of attention and find the needle in the haystack, the buyer willing to do better than the rest.

Management Fees

noreply@blogger.com (Michael McQuaid) — Mon, 12 Dec 2011 17:20:00 +0000

Does it seem odd that professional management of apartment buildings (and really all commercial property) gets paid on the top line rather than the bottom line?

Why can’t professional management be compensated as a percentage of the net rather than the gross? Then the management company interests are nearly identical to the owner interests.

Rising tide or sinking ships?

noreply@blogger.com (Michael McQuaid) — Fri, 09 Dec 2011 19:14:00 +0000

Twenty years ago we had a huge increase in the number of new apartments built. Most were in the outlying areas like Kent, Federal Way, Montlake Terrace, etc. Now they are all showing up on Queen Anne, Capitol Hill, Interbay, and West Seattle. The last surge of new construction of apartments in the 1980’s delivered huge projects in the outlying areas and small (20-30 unit) projects in the urban core. Now the huge projects are showing up in the urban core.

What is going to happen to the existing “old” stock of apartments? Will they still be appealing when compared to new product with free wi-fi, in unit washers & dryers, community rooms. Did theses close-in properties survive and/or thrive simply because they are close-in and how will they compete with the new product designed towards the next generation? Will size even matter to the Gen Y group or will they trade that for conveniences like living over a grocery store and coffee shop?
Somehow this feels similar to the 1980’s but a lot different too. As usual, only time will tell.

Economic distress = more renters?

noreply@blogger.com (Michael McQuaid) — Thu, 03 Nov 2011 16:59:00 +0000

Article from CoStar:

The Coming Rental Housing Wave
Protracted Economic Distress in Housing Sector has Created Legions of Renters in New Markets and New Age Groups
By Mark Heschmeyer
November 2, 2011

While widespread recovery continues to elude the housing sector, the apartment market has become one of the real estate industry's -- and the broader economy's -- best hopes for a return to the good old days, with robust property values attracting keen investor interest. And it has the Great Recession to thank for it.

The multifamily market is benefitting from changing demographics and consumer attitudes toward renting resulting from the growing number of financially stressed households. The increase in young and newly formed households that have decided to postpone or even reject homeownership in favor of the lower debt and flexibility afforded by renting during these last unsettled economic years.

"It's an exciting time to be in this growing sector where it is projected that $1 trillion in capital and 10 million additional apartment units are needed in the next 10 years as more individuals turn to apartment living," said Freddie Mac Multifamily Senior Vice President David Brickman.

Renters now make up more than 40 million households - about one-third of total U.S. households, according to Brickman. For every 1% that the current homeownership level of 66% decreases, one million individuals become renters.

The changing demographics also show a significant increase in immigrants, 20-34 year olds, and baby boomers entering the rental market.

"The bottom line is that the multifamily market is poised for growth due to strong demand, healthy fundamentals, and limited supply," Brickman said. "These trends have renewed interest in the sector and investors are returning as evidenced by an increase in acquisition and refinancing activity."

Another 1.4 Million Renters This Year Alone
Through the 12 months ending mid-2011, the Census Bureau reported a net increase of 1.4 million households that moved into rental housing, a 4% rise in the number of tenant households in just one year.

The U.S. homeownership rate has fallen about 1.5% over the past year (from 66.9% to 65.9% during the second quarter of 2011) with owner rates falling by 4.4% (to 21.9%) for those under 25 years of age and by 7% (to 34.7%) for those aged 25 to 29 years.

Apartment rents, which had been flat to falling in many projects during the 2008-2009 recession, have begun to rise, albeit slowly, Freddie Mac reported.

New construction starts of apartments in buildings with at least 20 dwellings have picked up this year and in the second quarter were the highest since the end of 2008.

"New construction starts are slowly picking up and multifamily lending appears to be rising as well with this year's origination volume stronger than 2010's," said Frank Nothaft, Freddie Mac, vice president and chief economist. "In part, the rise in originations is related to the low-level of mortgage rates, improving apartment-sector economics, and the return of traditional lenders that had curtailed activity during the recession."

Apartment Development Ramps Up as Demand Swells
After a surprising delay, the increased demand for rental housing has finally led to a considerable uptick in multifamily construction, the National Multi Housing Council (NMHC) reported in its latest Quarterly Survey of Apartment Market Conditions.

The pace of development activity has increased in most markets. Two-thirds (67%) of respondents noted considerable activity, either in the planning stage or actual new construction.

In particular, 20% said developers are breaking ground on new projects at a rapid clip. The other 47% reported an increase in pre-construction activities-acquiring land, lining up financing, getting building permits-but not much actual construction yet.

Even with this increased activity, more than half (54%) think new development remains considerably below demand.

"Powerful demographic trends, along with changing attitudes about homeownership and tighter mortgage underwriting, continue to drive a shift toward renting, which is fueling a ramp up in new construction," noted NMHC chief economist Mark Obrinsky. "While some survey respondents expressed concern over sporadic overbuilding, others noted that the lack of construction financing may prevent some developments from actually breaking ground."

Rents, Vacancies Benefiting from New Demand
Preliminary third-party data for the third quarter of 2011 suggest that the vacancy rate for institutional investment-type apartment properties has fallen and asking rents have now likely risen for six consecutive quarters, according to Fannie Mae.

Vacancy levels are firmly back to historical norms at an estimated 6.5% for the third quarter of 2011. Asking rents also likely rose again in the third quarter of 2011 by 1% quarter-over-quarter. It appears that full-year 2011 national average asking rent growth remains robust and on track to reach 4%, with effective rents perhaps reaching 5%, or even 6% annualized growth, Fannie Mae said.

While the strength of declining vacancy levels and increasing rental rates will vary by metro area, on a national basis the multifamily sector should continue to see steady improvement for the remainder of the year, Fannie Mae said. It expects average asking rents to experience an annualized increase of 4% and the vacancy rate to stay fairly stable, perhaps declining to 6.25% by the end of the year.

States with Opportunities
CoStar Group senior real estate economist Erica Champion has been tracking the changing housing attitudes during and following the Great Recession.

"For those of us with a special interest in the multifamily sector, we are chomping at the bit to find conclusive answers to questions that have been plaguing us since the collapse in the housing market," Champion said. "Has apartment demand really been that strong? Yes. Are there really that many more people renting apartments? Yes."

With the newest U.S. Census data issued this year, Champion has found some answers.

" 'Robust' is definitely the word for the rise in rental demand that took place over the decade from 2000 to 2010. In line with the drop-off in homeownership that started in 2006, 4.5 out of every 10 households added during the first decade of the new millennium are renters. This is compared to an average rental propensity of 34% in 2000," she said.

The trend has not been evenly apparent from state to state, she said.

"Of the states that added renter households at a faster rate than the national average, some are not a surprise. California and Nevada have been poster children of the housing bust and they remain top-ranking states in foreclosure activity, with rates twice the national average. Investors and developers that have been in love with North Carolina and Oregon can congratulate themselves for jumping on the right bandwagon," Champion said.

"The other states are surprises because they are not necessarily the top-of-mind locations for apartment development or investment," Champion added. "Developers and investors may have overlooked some areas with promising demand fundamentals. States such as Ohio, West Virginia, Pennsylvania, and Alabama saw enormous gains in the number of renters - more than six of every 10 households added over the decade were renters. Kentucky, Kansas, Indiana, Missouri, and Oklahoma adding more renters than the national average are also surprises. And there is no evidence to suggest that this boom is driven primarily by the housing bust. The foreclosure rate in West Virginia, Pennsylvania, Alabama, and Kentucky remains one-third the national rate. The rest are on par with or below the U.S. average," she said.

"With one in every two new households renting their homes, these surprise states may present an opportunity worth pursuing to build in a hidden gem location and, in some, to exercise a first-mover advantage," Champion state.

Unmet Demand for Middle Aged
Where Champion sees geographic opportunities, CoStar Group's senior real estate strategist Michael Cohen sees opportunities in an overlooked group.

Few concepts are tossed around more frequently at apartment conferences than the fact that younger households have the greatest propensity to rent, Cohen said.

However, while true, "researchers (and investors) who focus exclusively on the potential impact of the Echo Boomers, are missing a substantial piece of the overall apartment demand story," Cohen said. "The total number of middle-aged households in the U.S. - 35 to 64 years old - outnumbers households under 35 years old by three to one. In turn, 20 million, or half the total number of renter households in the U.S., can be found in this middle-aged demographic."

"Interestingly, as we begin a new wave of apartment construction as evidenced by a steady increase in multifamily starts, I wonder whether developers truly understand the contours of their renter base," Cohen said. "After all, is it the 22-year-old fresh out of college at the leasing office inquiring about stainless-steel appliances and granite countertops? Quite the contrary: more likely than not (well, at least 50% of the time), it's a middle-aged household."

The Actual "pro forma"

noreply@blogger.com (Michael McQuaid) — Tue, 23 Aug 2011 18:37:00 +0000

This is the best term I have encountered in a long while. It has occurred to me that many agents have taken to marketing properties today with future income as if it is in place now. While this may be appropriate within reason there are two things to consider: the first is that a lender will not loan on rents not currently in place so the loan calculation must be done on current income only (meaning a lower loan amount than what could be obtained on the pro-forma rents) and second is that a buyer usually wants to know the current income as well as the projected income numbers.

I just made the mistake, once again, of telling a buyer that a property just came for sale at a 5.5 CAP since that is how it is being presented. Once I dove into the actual figures I realized that nearly every number had been tweaked to be better than actual to such a degree that the deal is actually about a 4.5 CAP today. This is a fairly big gap but not necessarily a bad deal on current figures except when your expectations have been falsely set at the better number. In other words, tell me what you are doing today and what you think you can do tomorrow and I will decide how much of tomorrow I want to pay for today.

This is for sure a pro-forma type market where buyers should expect upside but I think everyone wants to at least know the starting point beforehand. I always assume that anyone with the money to buy a building was smart enough to have earned that money first and smart enough to know the difference between pro-forma and actual. No one with enough money to buy a building is ever so easily fooled.

MCQUAID COMMERCIAL CLOSES BRENTWOOD APARTMENTS

noreply@blogger.com (Michael McQuaid) — Fri, 15 Jul 2011 17:06:00 +0000

July 14, 2011: On Monday Will Gibson, sales agent at McQuaid Commercial, closed the sale of the Brentwood Apartments on behalf of the estate and heirs of Pauline Walsh for the price of $1,266,208 for the two six unit buildings located at 2919 Franklin Ave E.

The buyers for the property are a group of local investors, formed as Brentwood Partners LLC, who “bought the property with the intention of completing the deferred maintenance items and performing substantial renovations and upgrades”, according to Gibson who spent considerable time with the buyers during their due diligence. Major components like the roof, plumbing, and brick work were in obvious need of attention however the buyers said they are attracted to the investment because of its great location and charm potential.

The price this property sold for equates to a 5.06 CAP and a 10.5 GRM using the current income and expense data for the property. The sellers provided the financing for two years at 6% interest only so the buyers could complete their improvements and then seek long term financing.

MCQUAID Commercial Real Estate is located at 400 Roy Street in lower Queen Anne. It is an open-concept boutique-style firm offering advising services and focuses on superior client representation.

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Welcome Jen!

noreply@blogger.com (Michael McQuaid) — Thu, 14 Jul 2011 17:02:00 +0000

Announcing our newest team member: Jennifer Smith. Jen is the new chief of marketing and administration at McQuaid Commercial. She comes to the company with a vast experience in I.T. , H.R., and has significant contemporary knowledge in social media and web design and marketing.

Jen moved to Seattle in 2009 from South Carolina for greater pursuit of enhancing her career, lifestyle, and family.

I am happy to have a fresh perspective on the way things work around here so I expect she will challenge me often.

Announcing a change at McQuaid Commercial:

noreply@blogger.com (Michael McQuaid) — Wed, 13 Jul 2011 16:46:00 +0000

Cleary O’Farrell has departed recently to pursue her photography career full time. She was the first employee of McQuaid Commercial and was completely dedicated to the company, often working evenings and weekends, especially when the company first started. Cleary was the driver behind most of the social network avenues that are in use by McQuaid today. She led all marketing efforts and oversaw all design and web structure as well as the day-to-day operations of the company.

When Cleary came to McQuaid she said that she was attracted to a start-up company in a highly competitive and well established business but that she intended to one day start her own company to do what she loved most, photography. The past year or so she has received great accolades and a significant increase in the photography business so that she now has the book of business established sufficient to allow her to do what is most attractive to people about this country: start her own business.

Everyone at McQuaid wishes Cleary tremendous success and she will be terribly missed. If anyone needs great professional photography work at below market pricing they should contact her directly at: Cleary@clearyphoto.net

Is sub-metering dead in Seattle?

noreply@blogger.com (Michael McQuaid) — Thu, 30 Jun 2011 19:13:00 +0000

The City is sending letters to landlords telling them that the City will no longer open new accounts for tenants for water, sewer, and garbage. I think this could have a significant impact on the “not my problem” utility costs issue going forward. This causes me to consider all kinds of corollary issues but let’s focus on just this simple one for now.
My understanding of this letter (attached) is that if a landlord has sub-meters for tenant water consumption and the current tenant vacates the next tenant will not be able to get the meter billing into their name and responsibility. So the options for the landlord are to pay the entire water bill themselves and incorporate it into the rent (as still probably 60% of Seattle Landlords do), or bill the tenants an additional amount that is imprecise, or read each meter each month and do the math and bill each tenant their appropriate amount, effectively making the landlord a utility provider. This sounds like a suddenly ripe opportunity for some enterprising legal minds to make hay with.

On the bright side, if you were one of those landlords jealous of your peers with tenant paid utilities you may now be glad you didn’t spend the money to sub-meter and will now be renting for truly comparable figures with everyone being forced to have their rents be all-inclusive.

A further thought on this is to wonder how this will affect consumption but who has the time to theorize on that topic all day when there are now all these tenant bills to create.

e-Resources For Advertising Your Rental Property

noreply@blogger.com (Michael McQuaid) — Wed, 22 Jun 2011 17:38:00 +0000

In this age, there are more advertising options than ever.

As most people find rental properties online, having a dedicated webpage for a rental property is a great way to catch those online seekers. A simple page stating the address, property description, photos and contact information is exactly what will help bring people to you. Add more pages to your site to add interest, and show different unit types and neighborhood attractions. This will reduce your future renters’ search time, and give you a quick way to show exactly what is available and how great your property is.

Another tool is Twitter. Twitter is a constant feed of live information from many sources, and you choose your network. It’s a great way to show your property has a pulse and is desirable, bringing people into the world of your building. Use Twitter to post or ‘tweet’ any vacancies, announce neighborhood gatherings, markets and festivals, road closures. Be aware though, that all posts are public unless you choose to ‘protect your tweets’. Protecting them only allows those ‘followers’ (eg. your tenants) to see your tweets. If you are sharing building information this might be a good idea.

Google Maps has a way you can list your business (or property) for free. You may have noticed when looking at them that you can see business names and neighborhood features on the map. You can get yours on the map by setting up a business listing with Google. You will also have a chance to set up a Google Places account which is like an online phonebook ad; all your property’s contact information and reviews, plus a link to Twitter, photos you upload – anything to help market your property. Google can also keep track of your search traffic and how many times people click on your map listing (and/or website)! Simply go to www.google.com/placesforbusiness to get started and set up your account.

These resources can cut your advertising time in half, and make your life easier when vacancies happen. The more time you can spend on your building (and not in the office) the better.

Movement

noreply@blogger.com (Michael McQuaid) — Mon, 28 Mar 2011 20:35:00 +0000

About two weeks ago I sold my home of 26 years and my wife, dog, and I all moved into a high rise condominium in the middle of downtown Seattle. In my work life once the business day was over I usually headed for home, away from the center of town. Now I can see what is going on 24 hours per day in Seattle.

I tried to go to a restaurant last Wednesday night, calling about an hour before I wanted to go. The first three I called (all close to where I live) were fully booked. The fourth one had a table at 9:30. I remember saying out loud to my wife “this is Seattle, not NY; we should be able to get a table on short notice as we always have”. Not anymore. The City is really back to life.

I have several clients and friends who are in the food business and they all are reporting the same thing: significant activity has suddenly appeared after a very long slow period. For those who survived the drought they are now enjoying the rain (so to speak).

I cannot help but think that it always starts with the cheapest laborer in the market. This could be the dishwasher at a restaurant who is now washing so many dishes the place has to hire a second. This could easily be a phenomenon but it could just as easily foretell that the economy is really heading up, finally.

What does this have to do with the apartment business? A lot, in my opinion.

What do you think?

McQuaid Commercial Closes Another West Seattle Deal

noreply@blogger.com (Michael McQuaid) — Fri, 04 Feb 2011 19:51:00 +0000

February 4, 2010:

McQuaid Commercial Real Estate has sold a 7-unit multifamily property located at 4000 California Ave SW in West Seattle.

“The buyer, H&G Properties, had been on the sidelines of the apartment market for the past three years but found today’s combination of pricing, lending rates, and lack of appealing investment alternatives too strong to not participate” said Michael McQuaid, the broker representing the buyer group.

The sales price of $850,000 equated to an 11.6 GRM and a CAP of 5.39%. Given the generally good condition of the building and the good rental sub-market, walking distance to the heart of the retail core of West Seattle, and access to public transportation, this property appeared to be an excellent opportunity for the buyer who intends to self-manage the property and improve the operations over the next year, said McQuaid, who has represented this buyer in the past.

The buyer obtained a loan from Luther Burbank S&L at the rate of 5.05% fixed for five years. The building is situated on a corner lot, has a pitched roof, and very large units, plus ample off-street parking including a very large garage.

MCQUAID Commercial Real Estate is located at 400 Roy Street in lower Queen Anne. It is an open concept, boutique-style firm offering advising services and focuses on superior client representation.

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McQuaid Commercial Closes West Seattle Deal

noreply@blogger.com (Michael McQuaid) — Tue, 04 Jan 2011 22:49:00 +0000

January 4, 2010:

McQuaid Commercial Real Estate has sold a 24-unit multifamily property located at 3515 SW Ocean View Drive in Southwest Seattle.

“We are pleased to get this property closed in 2010, after an exhaustive marketing effort over many months” said Michael McQuaid, the broker representing the seller group.

The sales price of $2,050,000 equated to a CAP rate of 5.16 and slightly over $102 per net square foot. The building was in average condition with many long term tenants and was managed by one of the five owners, all but one of whom is a decedent of the original developers such that this is the first time this 1979 building has ever sold.

The buyer is David Katt, a local investor who lives within a few miles of the building and has many years of rental property experience, primarily with single family homes, some of which were sold and the proceeds invested in the 24-unit through the use of a tax-deferred exchange.

“This was a challenging sale due to the absolute lack of anything else in the area to look at for comparable rental or sales values.” McQuaid said Tuesday. “The property is nearly equidistant to the Fauntleroy and White Center neighborhoods, dramatically different market places. The buyer paid all cash and expects to spend another $200,000 on the building for deferred maintenance and upgrades.”

MCQUAID Commercial Real Estate is located at 400 Roy street in lower Queen Anne. It is an open concept, boutique-style firm offering advising services and focuses on superior client representation.

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Great News ... Maybe?

noreply@blogger.com (Michael McQuaid) — Mon, 03 Jan 2011 17:48:00 +0000

Last week the local paper had an article on the front page headlined “Apartments are red hot despite cool real-estate market”. I read it twice and think what it should have said is “lenders like apartments so developers will build them since they can’t borrow money to build anything else”.

I am a salesman so I am nearly always optimistic by nature as that is a job requirement, for sure. Developers are far beyond salesmen due to the relationship between enthusiasm/optimism and debt. The good news for developers is that lenders currently favor apartments. I suspect apartments are now in favor not because apartments have suddenly become scarce in supply but rather because they have exhibited the lowest default rates on lender debt. I am pretty sure lenders cannot make decent money without lending it out so here we go (again). My usual optimism is overcome with concern today that this is too soon. I have yet to talk with an apartment building owner who is enjoying rent increases, the usual harbinger of the time to build more. Moreover, I find most owners are still suffering above a 5% vacancy loss, yet another yardstick for the need to create new supply.

The issue driving the “red hot” apartments is really simply that lenders need to make loans and apartment loans look the least risky. So far.

For all my clients/friends who currently own apartments lets all hope together that we don’t experience a massive over-supply of apartments that simply cannibalize the existing tenants we all currently are fighting over.

In the meantime I suppose everyone should borrow all they can while these apartments remain in favor with the lenders. This would work well except that apartment investors are very cautious, risk-adverse types who won’t go over-leverage their portfolios so if a lender wants to make money they better lend to whoever will borrow it, hence the new development coming to your neighborhood soon.

I am optimistic that there will be a great new supply of renters though: the construction workers building the apartments. Of more interest to me is that if I have been an apartment investor for a very long time and want to retire I know that it is far easier to get a great price for a product selling upside than a product that looks like it may decline. The perception of upside, at least, is here today.

Does Location Really Matter?

noreply@blogger.com (Michael McQuaid) — Fri, 05 Nov 2010 20:23:00 +0000

In yesterday’s Wall Street Journal there was an article that talked about an investment fund called CORE investments, a fund that is buying very high quality properties, fully leased, in stable markets, at relatively low yields. I thought this was interesting because it shows that some pretty high IQ people have decided that it is better to be safe than sorry. For the past 20 years it seemed to me that every real estate fund out there was seeking extraordinary undervalued deals that they would add their expertise to and increase value significantly. Now the smart guys are seeking investments that they will do nothing to but hold as the preferred way to invest in real estate.

I recently witnessed what I want to call the Tale of Two Cities. The two cities are not that far apart, Burien and Fremont (I know Fremont is part of the City of Seattle but people who live in Fremont may disagree so I don’t want to offend anyone) but may as well be in different hemispheres as far as pricing today is concerned.

Within the past three weeks two separate sales of apartment buildings have closed at about the same price, one for $2,275,000 and the other for $2,250,000. The first is in Fremont: a 15 unit built about 20 years ago that sold for an 11.3 gross rent multiplier and a 5.09 CAP, $151,667 per unit. The other sale is in Burien for a building built about 40 years ago that sold for a 5.5 gross rent multiplier and a 7.57 CAP, $52,325 per unit.

Quite a stark difference that shows the premium price well located properties continue to obtain. This has been the case as long as I have been in the business of selling apartment buildings (over 24 years now).

McQuaid Commercial Closes Third Fremont Deal in 30 Days

noreply@blogger.com (Michael McQuaid) — Thu, 04 Nov 2010 19:15:00 +0000

November 4, 2010: McQuaid Commercial Real Estate has closed the sale of the Fremont Arms Apartments, a 6-unit building located at 800 N 36th street.

“Despite the complexities involved in this particular sale we are extremely pleased with the price we achieved for our client (the sellers).” Noah Klika, seller representative said Thursday. “Getting $160,000/unit for this property illustrates the premium the market is willing to pay for well located apartment buildings in a so called ‘down’ market.”

The buyer for the property is of the typical Seattle fashion: a well-to-do couple working for a local technology company and University looking to expand their personal portfolio of income producing properties (investments which provide attractive yields and safety compared to other investment alternatives).

The seller is a long-term family partnership exiting the rental business after owning and operating a portfolio of multi-family and mixed-use buildings throughout the Seattle area

Fremont Arms sold for $960,000, with a 5.7% cap rate and 11.35 GRM. This calculates $171.43/sq ft and $160,000 per unit.

MCQUAID Commercial Real Estate is located at 400 Roy street in lower Queen Anne. It is an open concept, boutique-style firm offering advising services and focuses on superior client representation.

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Overlooking Opportunity

noreply@blogger.com (Michael McQuaid) — Mon, 18 Oct 2010 16:34:00 +0000

By Noah Klika, McQuaid Associate Broker

A pricing expectations gulch continues to exist in the Seattle multi-family market today that began almost two years ago. Sellers are reluctant to list and sell their property because they cannot get the 4% cap rates once offered to them a couple years back by condo converters and town home developers. Buyers continue to keep large amounts of cash or capital on the sidelines to pounce on the 8-10% cap rate trophy property underwritten properly in an A+ Seattle neighborhood that becomes available (supposedly). This disagreement over what buildings are worth has resulted in an extraordinary reduction in sales. The number of buildings sold year to date and now in the fourth quarter stands at 60 properties (5-75 unit properties or non-institutional grade for the purposes of this conversation). Compare this to an average of over 300 buildings sold annually from 2005-2007 or what many consider the peak of the market. Let us also look at the number of buildings sold after the last time a regional recession took place (dot com bust). Between 2000-2003 over 200 buildings on average sold during each of those years.

Despite an ever increasing amount of mixed or negative news revealed each day about the fragile economy and feeble pace of growth there exists a rare opportunity that benefits both sellers and buyers who are willing to participate in the market today. For buyers, interest rates for commercial loans have finally become commensurate with the ultra low rates available for residential real estate. We are working with buyers getting 4% or lower rates for commercial multi-family loans. For those who believe cap rates are still too low I feel you should consider this: When was the last time you were able to get positive leverage on A+ properties in the most coveted Seattle neighborhoods? And if so in many cases upwards of a 1.5-2% spread looking at cap rates of buildings we have recently sold or have in escrow currently. Not to mention the other corresponding metrics to determine your return on investment. Sellers, historically speaking and relative to other parts of the country currently whether it be a coastal urban market like San Francisco or New York or middle America, when has the opportunity to sell your property for a sub 6% cap rate become an unappealing opportunity?

I do not have a crystal ball to say whether the market will get better or worse. However, I did just read a report I always enjoy reading which is done annually by the Urban Land Institute and PricewaterhouseCooper ranking Seattle the sixth best metro in the country for commercial real estate investment with the spotlight on the multi-family sector. It even speaks about new development and construction for multi-family picking up, a leading indicator. Will better pricing opportunities exist moving forward for buyers or sellers?

My goal in writing this is to make both buyers and sellers think hard about their decisions to participate in the market today. All the negativity and uncertainty in the news can lead to flawed conclusions. Everything is easier in hindsight and the dynamics of the marker today benefit all parties involved.

For those who think the market is dead, we have had multiple offers in the pricing discussed above on multiple properties sold in the recent past or currently under contract. Sellers interested in an opinion of market value or buyers looking to find a great multi-family investment opportunity please feel free to call McQuaid Commercial Real Estate at (206) 270-8880 or visit our website at www.mcquaidre.com.

We look forward to helping you in any way we can.

Sold: Evanston Apartments

noreply@blogger.com (Michael McQuaid) — Mon, 20 Sep 2010 22:04:00 +0000

The most interesting thing I am finding in the market today is the very strong interest from people who have never owned apartments before. Since July we have brought six properties to market and while all have sold only two sold to buyers with other apartment building investments. I think there are a lot of people looking at the apartment investment market in comparison to other investment options and finding it attractive in that perspective, not the perspective of past apartment markets or some misguided perception of how today’s market should be. In other words, the current market for high quality apartments in the 5-100 unit size range is about a 12 gross rent multiplier and a low 5 CAP rate, which when using new debt of 50-60% of the purchase price bearing an interest rate in the high 4% range, these investment should yield 4-5% cash on cash returns. This is not a bad return today and I think people with experience in other investment types are starting to realize that.

The Evanston sale was from a long term ownership family (they built it in 1989) selling to a local first time apartment building investor employed, oddly enough, in the equities advice industry. The price was equivalent to an 11.65 GRM and a CAP of 4.96. $143,750 per unit.

Press Release: Kent Warehouse Sold

noreply@blogger.com (Michael McQuaid) — Tue, 24 Aug 2010 23:27:00 +0000

August 24, 2010: McQuaid Commercial has sold a warehouse in Kent, representing the seller who is an out of state bank that foreclosed on the property late last year.

“When I first arrived at the property I discovered it to be in complete disarray following a bankruptcy auction of essentially the entire interior of the building.” Michael McQuaid, the agent for Private Bank, said Tuesday. “This included all HVAC equipment and the vandalism/theft of most of the plumbing and wiring distribution, so I knew selling this property would be a significant challenge”.

The seller wished to find a broker known for being able to assess a situation like this one and give guidance; acting as the eyes and ears of the owner with a single goal of selling the property as quickly as possible in a market place with very, very few sales comparables. While there were several offers from buyers hoping to pay land value only, McQuaid continued to seek an owner-user type buyer and then worked with his agent to coordinate the challenges of obtaining financing due to the condition of the building. In the end, the buyer, a local food distribution company, obtained a great loan from two SBA participating lenders.

The property sold for $2,100,000. The building was a shell of 44,000 square feet on a 77,000 square foot parcel of land located at 22613 76th Ave S in the city of Kent, WA

MCQUAID Commercial Real Estate is located at 400 Roy Street in lower Queen Anne. It is an open-concept boutique-style firm offering advising services and focuses on superior client representation.

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Theory vs. Facts

noreply@blogger.com (Michael McQuaid) — Wed, 21 Jul 2010 17:18:00 +0000

While I was at a building inspection yesterday, I took a call from an appraiser (always help the appraisers) who was asking about a sale we closed a few weeks ago in North Seattle at a 5.95 CAP. He was trying to figure out why the CAP rate was “so low”. I asked him where he is seeing higher real CAP rates and he actually couldn’t give me any decent examples. In other words, rather than basing an opinion on facts he was, like so many people are today, basing his opinion on theory. The problem is that he is an appraiser.

We just brought to market for a seller a portfolio of five buildings in the Fremont and Maple Leaf neighborhoods. Within a week, three of the buildings are firmly under contract with buyers paying at or very, very near the asking prices and we are working through offers on the other two now.

These properties are selling because they are in good areas, in good condition, and being offered at reasonable prices. By reasonable I don’t mean the high CAP rates that many people think is necessary to sell today but rather a reasonable price relative to the specific properties. Not one of these is near and certainly not above a 6 CAP and all are in the neighborhood of an 11 GRM. Good properties are rarely for sale today which is why we have such strong interest. There is not a shortage of buyers but a shortage of good inventory priced reasonably.

When these five properties close escrow, I expect more calls from more incredulous appraisers wondering what the story behind these “unusual” sales is. Nothing but normal business will be my answer.

Good buildings get good buyers who get good loans, all through good brokers today.

Press Release: McQuaid Commercial Closes Bitter Lake 22-unit

noreply@blogger.com (Michael McQuaid) — Tue, 06 Jul 2010 18:15:00 +0000

July 6, 2010: McQuaid Commercial Real Estate closed the sale of the Arbor Heights Apartments, a 22-unit building located at 625 N. 130th Street in Seattle.

“This is a great example of the current marketplace where only truly good properties appropriately priced are selling while mediocre buildings are languishing on the market” Michael McQuaid, who represented the seller of Arbor Heights, said Tuesday.

The buyer for the property, Greg Deer, bought as the up-leg of a 1031 exchange with the sale proceeds from a string of duplex properties he recently sold on Beacon Hill in Seattle.

The seller, an LLC for a local unnamed owner who sold to re-deploy the equity into a new business venture, was pleased to be one of few sales this year.

The price of $2,300,000 worked out to a CAP rate of 6.21 and a GRM of 9.85.

MCQUAID Commercial Real Estate is located at 400 Roy street in lower Queen Anne. It is an open concept, boutique-style firm offering advising services and focuses on superior client representation.

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First Place Never Felt So Lame

noreply@blogger.com (Michael McQuaid) — Wed, 16 Jun 2010 17:23:00 +0000

I just finished reading an article published in Business Week wherein Seattle has the largest drop in rental prices in the country, with the average monthly rent falling 13.8% during 2009. BusinessWeek's report undoubtedly raises some questions. Number one being if rents are still decreasing, what do you do?

For those thinking they might want to sell in the next 2-3 years, sooner than later will be to your advantage. Selling today would allow you to avoid potential future decreases and capitalize on a low capital gain tax rate likely to increase in the near future. The combined differential of rents and taxes could easily be 10-15% of the value of the building.

For those wanting to ride the wave, buying now will be in your best interest since interest rates will likely rise faster than rents which means that the down payment required will increase beyond what is needed today, for example.

Either way, markets have fluctuated throughout history and this just happens to be Seattle’s low moment. But for every loss there is a win, and the winners know how to take advantage of it while they can.

So what does it take to win? You’ll have to call me.

Give Back: Veterans Golf 2010 Invitational

noreply@blogger.com (Michael McQuaid) — Fri, 11 Jun 2010 16:29:00 +0000

The 2010 Veterans Golf Invitational will be happening at the West Seattle Golf Course on August 10th of this year. It is a tournament to benefit the American Lake Veterans Golf Course, which accommodates the special needs of disabled players. We donated to this cause to support those veterans who have given for our country; if you would like to support it too, contact Dow Lucurell of Uptown Espresso: uptownesp@aol.com

American Lake Veterans Golf Course:
www.veteransgolf.org

Too Late.

noreply@blogger.com (Michael McQuaid) — Wed, 21 Apr 2010 22:47:00 +0000

I just watched the afternoon edition of Bloomberg. Now the “experts” are saying that not only has the market bottomed but it has now come back to high price levels. One of them gave an example of a big $160M deal in New York that just sold for a 3 CAP.

Funny was one of the experts said what everyone has been thinking: “where are those 9 CAP deals we have all been waiting for?” and the best comment I think I heard was “the smart money is done waiting and is now buying and selling”.

So it seems to me that the investors waiting for the desperate deals never really found them and we are heading back to regular business as usual. Since I can’t seem to get the hang of golf I am glad to hear this and I look forward to a busy rest of the year.