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Top 10 Key Takeaways from CAPRE’s Eighth Annual New Jersey Apartment Summit

Dec 5, 2018
by Brian Klebash

NEWARK, New Jersey – On November 29, CAPRE convened 250 senior-level commercial real estate executives for its Eighth Annual New Jersey Apartment Summit. The popular summit was held at the Robert Treat Hotel in Newark. Executives convened for important industry discussion, debate and networking. View CAPRE’s exclusive photo slideshow of the summit>

 

Bryan Oos, Vice President of Development, Toll Brothers Apartment Living; Jeff Persky, Executive Vice President, KRE Group; David Wolfe, Managing Partner, Skoloff & Wolfe, P.C. and Marc Pantirer, Vice President, BNE Real Estate Group participated in CAPRE's Eighth Annual Northern California Data Center & Cloud Infrastructure Summit, held on November 29, 2018 at Robert Treat Hotel in Newark.
Bryan Oos, Vice President of Development, Toll Brothers Apartment Living; Jeff Persky, Executive Vice President, KRE Group; David Wolfe, Managing Partner, Skoloff & Wolfe, P.C. and Marc Pantirer, Vice President, BNE Real Estate Group participated in CAPRE’s Eighth Annual New Jersey Apartment Summit, held on November 29, 2018 at Robert Treat Hotel in Newark. Brian Klebash for CAPRE

With uncertainty surrounding the impact of interest rate hikes on overall investment activity and a possible oversupply of luxury units in Northern New Jersey submarkets, CAPRE compiled a “Top 10” list of the most important takeaways from our expert speakers.

#10) Alan Hammer, Partner, Brach Eichler LLC on state of the New Jersey market, impact of interest rate increases, and where he’s seeing deal flow in 2018:

“The marketplace has continued to be strong but I have lost a couple of deals due to interest rate changes, very large deals in the range of multi-hundred million dollars deals, highly leveraged transactions. Sometimes [interest rate changes] take away the buyers’ interest and incentive to do the deal. Historically, we have represented more purchasers than sellers. In recent years we have represented  as many sellers as purchasers in the New Jersey market. Right now, we are doing a fraction of our transactional business in New Jersey. Most apartment house work is in other jurisdictions, in other states –  a lot of activity in South Carolina, North Carolina, Virginia, Maryland.  Looking at the marketplace from the operational standpoint, occupancy is good in just about every market in New Jersey. Rent growth has diminished a bit, but not nearly what we saw a a couple years ago. Occupancy is still high with minor pockets.”

#9) Bryan Oos, Vice President of Development, Toll Brothers Apartment Living says modern transportation is changing developer mindset:

“One trend is with new modes of transportation. For example, Uber has had a pretty dramatic impact on how people get around. The introduction of autonomous vehicles, whenever that happens will be transformative in the short run.  You’re seeing more e-scooter and e-bike companies.  In terms of looking at that last mile, [those new transportation modes] will significantly impact the definition of walk-ability and access to transit.  Do you need to be a quarter mile from a train station as a developer?”

#8): Maurice Hornblass, Co-Founding Partner, Hornrock Properties on the strength of multifamily in New Jersey, and how he sees opportunity unfolding:

“Multifamily still has longevity. There will be lots of absorption in the future and this will continue. One thing that comes to mind is opportunity zones:  A lot of outside capital, and institutional money – everyone is trying to jump on the bandwagon. Question is who: who can get it done in time?”

#7: Jeff Persky, Executive Vice President, KRE Group on building affordable in New Jersey:

“When you go into PILOTS in various towns, they’re proposing only affordability units – ultimately a good thing. But this presents challenges in terms of making proformas work out. This requires union labor which is significantly high with use of PILOTS.  In high rises you don’t have a choice.”

#6: Marc Pantirer, Vice President, BNE Real Estate Group says westward expansion of Manhattan Island will boost Gold Coast multifamily:

“As long as you have Manhattan, you look at the west side of Manhattan with Hudson yards to the financial district, those people continue to go west as long as the commute is reasonable. Some of these other variables: taxes, and interest rates will affect the amount of development but we’re still bullish as long as that [western Manhattan]  trend continues to grow.”

#5: Adam Altman, Managing Director, Partner, KABR Real Estate says multifamily is a strong performer, compared to office and retail:

“In terms of multifamily, when you look at it as asset class, let’s say suburban office is a four letter word in most institutional rooms, retail has a similar effect, industrial is still hot but likely to slow, multifamily is a relatively safe asset. Dollars will continue to go to multifamily for that reason. In terms of interest rate risk, well it’s not so much a risk as math. There’s a .4 correlation between cap rates and interest rate increases. I look at where cap rates will be 24 months after I bought an asset.”

#4: David Wolfe, Managing Partner, Skoloff & Wolfe, P.C. says the revaluation in Jersey City may have caused a slowdown in investment activity, but expects more transactions going forward:

“The Jersey City revaluation caused a huge amount of uncertainty. The revaluation reduced on trades, but now that is in the books, I think you’ll see more trade activity. “

#3: Israel Schubert, Senior Managing Director, Meridian Capital Group says multifamily is active in the face of interest rate increases because of historically low rates and the majority of housing stock that is not luxury:

“Development and new construction of high-end units is in one bucket, but the majority of multifamily housing stock is existing C plus,  B to B Plus – older houses. That’s the majority, and with the amount of liquidity that’s available, cap rates are still healthy and people are still able to get decent returns. If you think about the market, is it cresting? Is it at the end? Well, capital flow is still strong, financing is still extremely resilient even with interest rates up. You can do a 15 year deal under 5%.  Based on what everyone can see, the market continues to be stable and I don’t think we will see a crest anywhere in the near future.”

#2: Jose Cruz, Senior Managing Director, HFF sees more capital coming into New Jersey multifamily deals after a slowdown, but says property taxes remain an obstacle:

“Overseas capital will be much more in play 12-24 months in New Jersey. That line between domestic and foreign is very blurry today, but that’s fine as long it’s capital chasing commercial real estate in New Jersey. Property taxes are coming up in every conversation and impacting pricing and deal flow – and there’s a lot of risk in these deals. “

#1: Ron Simoncini, President, Axiom Communications’s words of wisdom:

“Over a long career we say buy a lot young.”

 

Ron Simoncini, President, Axiom Communications and Victor Cole, Principal, AION Partners participated in CAPRE's Eighth Annual New Jersey Apartment Summit, held on November 29, 2018 at Robert Treat Hotel in Newark.
Ron Simoncini, President, Axiom Communications and Victor Cole, Principal, AION Partners participated in CAPRE’s Eighth Annual New Jersey Apartment Summit, held on November 29, 2018 at Robert Treat Hotel in Newark. Brian Klebash for CAPRE

Brian Klebash is President & Founder of CAPRE. He produced the first New Jersey Apartment Summit in November, 2011. He can be reached at bklebash@capremedia.com or via LinkedIn.

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