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ST. LOUIS, MISSOURI (February 17, 2023) — Dominic Martinez has been promoted to senior vice president – investment sales in Northmarq’s St. Louis office. Martinez will continue working with Parker Stewart, managing director – investment sales to build momentum with clients and deliver high level of sales volume with his team. Martinez joined Northmarq in 2021 as an associate vice president – investment sales and has since played a vital role for St. Louis multifamily sales transactions.
“Dominic’s business has continued to thrive, and I am extremely fortunate to call him my business partner. As our team continues to grow, Dominic’s impact on the training and development of our team members will play a critical role in enhancing our team’s overall bandwidth,” said Stewart. “On the production side, we will continue to benefit from his long list of national relationships with multifamily owners across the country.”
In his new role, Martinez will continue to specialize in the evaluation, advising, marketing, and sale of multifamily assets throughout the Midwest. Additionally, he will maintain coordination with the St. Louis debt and equity team. His focus and expertise throughout secondary and tertiary markets across the Midwest provides clients the ability to access resources outside of local markets in order to most successfully execute on their respective business strategies.
Since joining Northmarq, Martinez has been awarded and recognized as a 2021 ‘Power Broker’ by CoStar, within Northmarq’s St. Louis top sales team.
Prior to Northmarq, Martinez served as an associate director at Berkadia’s Kansas City Office. He completed the sale of over 3,500 units and $300 million in total consideration, comprising of five states across the region. Before Berkadia, Martinez began his career at PricewaterhouseCoopers as an Assurance Associate within the financial services industry, specifically focused on banking and asset management companies.
Martinez graduated from the University of Missouri where he attained a Master of Accountancy and is currently a licensed CPA.
MINNEAPOLIS, MINNESOTA (February 14, 2023) – Parker Stewart, managing director of Northmarq’s Midwest multifamily investment sales team, joined a select group of top professionals who were inducted into the thirteenth class of the annual Midwest Commercial Real Estate Hall of Fame. Important players from all aspects of the commercial real estate industry were chosen based on their impact shaping the landscape of their cities and the Midwest region.
Stewart ranks as one of the busiest multifamily brokers in the region. How busy? He has sold more than 15,000 apartment units in nearly a dozen states throughout his career.
And Stewart’s production doesn’t seem ready to dip anytime soon. Since joining Northmarq in 2021, he has been involved in the sale of more than 8,000 apartments totaling more than $875 million.
A reason for this success? Stewart cites his entrepreneurial spirit.
“The harder you work, the more success you will have,” Stewart said. “I love that there are no ceilings to how far you can advance in brokerage if you are driven. After some point, you will be rewarded for the hours, energy, and effort that you put in.”
Being trustworthy has mattered, too. Stewart is always honest with his clients, and he always makes it a priority to do what he says is going to do.
“When we are awarded an assignment, it comes down to someone putting trust in us – that we will work hard on their behalf and do everything we can to come through for them,” Stewart said. “It’s extremely important to remember that. And that there is almost always somebody next in line if we can’t get the job done.”
Last year was an especially busy one for Stewart and his partners, Dominic Martinez in St. Louis and Alex Malzone in Chicago. The team sold 5,426 multifamily units for more than $650 million.
A few of their 2022 highlighted sales include a 1,288-unit value-add portfolio in Madison, Wisconsin; a 272-unit, $70 million Class-A new development in St. Peters, Missouri; and a 304-unit complex in Peoria, Illinois and a that sold for $45 million.
In 2021, Stewart arranged the largest single-property sale in Nebraska history, closing the sale of a 613-unit resort-style complex in Lincoln.
Since the earliest days of his career, Stewart has enjoyed success, thanks to his willingness to work hard, study his markets and provide the best service to his clients. Stewart began his career at Berkadia, where he completed the sale of more than 7,500 multifamily units in five years, deals that spanned seven states.
“I try my best to be a good listener. That is essential in brokerage,” Stewart said. “I also learned early on that you can’t focus on a timeline with one specific client or deal. It is imperative that you listen and understand what a client is trying to accomplish, and then figure out how you can help them, whether it involves a deal short term, long term, or even at all. I’ve learned that the goal is to provide actual value to my clients, not to simply focus on what my agenda is.”
Stewart undoubtedly spends plenty of hours focused on his business. But when he’s not on the clock, he loves watching sports and is an avid St. Louis Cardinals fan. He also enjoys traveling, golf and spending time with his family. He enjoys staying active as much as possible by exercising and spending time outdoors.
But it remains to be seen whether or not demand has truly accelerated.
ST. LOUIS, MISSOURI (February 13, 2023) – While January had the smallest increase in rent since May 2021 according to various analysts, in a new report CoStar points out some upbeat news for the month: it was the first time since September that month over month rent data showed positive growth, with Midwestern markets Indianapolis and Cincinnati emerging as top leaders.
“While snapping the five-month negative rent growth streak is a positive start to the new year, it remains to be seen whether or not demand has truly accelerated,” Jay Lybik, National Director of Multifamily Analytics at CoStar Group, says in prepared remarks.
“If the positive rent growth trend persists, year over year data may finally change its course, signaling supply and demand are closer to regaining equilibrium,” he adds.
Markerr noted that it finds most markets are experiencing decelerating, but still positive rent growth in January 2023. The January trend remains in line with its quantitative rent forecast for 2023 of 4.2% Y/Y growth.
Other experts give their reasons for a brighter apartment outlook than current numbers suggest.
Fundamentals ‘Overall Extremely Strong’
Dominic Martinez, a Northmarq senior vice president, tells GlobeSt.com, that despite the recent slowdown, the fundamentals within multifamily remain relatively the same and “overall extremely strong.”
He said that Midwest rent growth is partially being fueled by a more conservative approach to adding supply.
“While there have been significant increases in the multifamily supply in more primary markets such as Phoenix, Dallas, etc., secondary markets, such as St. Louis, Omaha, etc., have been far more restrained in their development pipelines,” according to Martinez.
Northmarq said there are multiple factors that benefit the multifamily market. For instance, there is still a national housing shortage and with rising mortgage rates, buying a home is even more challenging than before, which in theory, will create a larger renter class. Also, on a macroeconomic level, unemployment is the lowest nationally since 1969, pointing to a strong economy. And finally, pairing the strong labor market with recent inflation, wages are expected to increase.
Overall, the benefitting factors outweigh the current headwinds in the multifamily market, Martinez said.
Recent Rent Growth Hasn’t ‘Flowed to the Bottom Line’
Michele Hrivnak, Investors Management Group’s managing director of asset management, tells GlobeSt.com that the fundamentals such as income and job growth are solid enough in the markets where her company owns to withstand market fluctuations.
“Discussions about higher or lower rents are only half of the story because expenses are the other variable that determines net income,” she said.
“Consider that the double-digit rent growth over the past couple of years hasn’t flowed to the bottom line due to escalating insurance costs, higher property taxes, and increased expenses for salaries and materials. An asset manager’s role is to keep income growing faster than expenses, whether we’re in a high-rent-growth or no-rent-growth operating environment.”
The Market Has ‘Overreacted’
Neil Geary, CFO at The Procopio Companies, tells GlobeSt.com that the market has “overreacted” to rising interest rates and the fears of a recession.
“Now that it appears likely that we’ll have a soft landing, it makes sense that rents would adjust due to the continuing lack of supply of housing in our area,” he said.
“We expect that rent growth will continue at some level until supply catches up with demand. Our portfolio experienced only a minimal slow-down in Q4, and now we are seeing increased rental activity across the board. Procopio’s new projects are moving ahead as planned because more housing is needed.”
Not Many Vacancies in Manhattan
Scott Harris, an agent with Brown Harris Stevens, tells GlobeSt.com that he believes this recent data is seasonal.
“December is the slowest rental month of the year- few people are interested in moving at year-end,” Harris said. “It is more extreme than usual, though.”
He said he spoke last week with one Manhattan landlord who has 350 units. He told me that for the second time in four months, he had zero units come vacant in his entire portfolio.
“He doesn’t recall seeing turnover that low,” Harris said. “That would be another reason to see any nominal increases in rent levels.”
An Increase in High-Income Renters
Catherine M. Azevedo, Esq., senior associate at Romer Debbas, tells GlobeSt.com that there continues to be a shortage in the housing supply and rising interest rates driving the demand for rentals.
“The number of high-income renters also appears to increase because renting affords convenience, security, and flexibility,” Azevedo said.
“However, affordable housing and access to affordable housing remain at the forefront of this dialogue. Federal and local governments and government-sponsored enterprises (GSEs) are combatting the lack of affordable housing through various initiatives which can present an opportunity for multifamily owners and lenders across the country.”
Spring Could Bring ‘True Demand’ for Apartments
Quentin Green, partner and director of development at Chicago-based Downtown Apartment Company, tells GlobeSt.com, “Now that we’re getting into the start of the spring market, we’re beginning to see the true demand for rentals.
“Given current interest rates and housing supply constraints, I’m not surprised there’s a solid demand to rent as buyers continue to sit on the sidelines in the for-sale market.
“Many potential homebuyers who thought they were going to be able to purchase a home this spring are instead finding themselves renting again. We’ve seen home prices decrease, but not enough to offset interest rates.
“This is the first early spring market in some time with such elevated interest rates. Although we’re only just coming out of January, it’s likely that rent growth will continue here in Chicago and in other major US markets.”
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ST. LOUIS, MISSOURI (January 9, 2023) – Multifamily investment markets have been on a bit of a roller coaster ride in recent years. First came the uncertainty surrounding COVID-19, then cyclical highs were achieved in late 2021 and early this year when vacancies tightened throughout the country, rents spiked, and multiple sources of capital were abundant, and lenders were competing to place debt. In the Midwest, apartment vacancies averaged about 4.5 percent at midyear 2022, and annual rent growth topped 10 percent in nearly every market in the region.
The current environment has a different look and feel than just a few quarters ago. Several consecutive interest rate increases have taken much of the wind out of the sails of the multifamily investment sales market and the economy as a whole. Inflation has dipped from the 40-year highs recorded earlier this year, but the threat of rising prices will continue to support a more restrictive Federal Reserve. The prospect of a recession—even a modest one—is causing many market participants to take a more cautious approach.
Despite these challenges, multifamily properties remain a preferred asset class, buyers are continuing to find investment opportunities, and deals are crossing the finish line. After a strong first half of the year, transaction activity has slowed as a growing gap between buyer and seller expectations has occurred. In the coming months, the hope is that pricing expectations will begin to realign, particularly if the costs of capital begin to stabilize.
Across the Midwest markets that Northmarq tracks, investment activity in the third quarter totaled approximately $2 billion, although nearly half of that total occurred in just one market: Chicago. Outside of Chicago, transaction activity has slowed as investors are exercising greater caution and lenders are offering less favorable terms than at the beginning of the year. To this point, in the fourth quarter, transaction volume is expected to lag behind levels from earlier this year.
The good news is that there are still buying opportunities and we have seen a steady flow of inventory available throughout the fourth quarter. As of early December, our Midwest multifamily team had closed 24 apartment sales year-to-date, spanning 5,200 units for a total volume of $580 million. This total includes the fourth quarter sale of a four-property, 1,288 -unit transaction in Madison, Wisconsin, one of the largest transactions across the region in 2022.
Owners reposition portfolios; private capital remains active
Inventory is being fueled by different factors. Some owners are seizing an opportunity to reposition portfolios and sell assets they may not want to hold through a downturn. In other cases, owners that may have planned to sell an asset in 2023 or 2024 are bringing those plans forward in case prices were to weaken further over the next 12 to 24 months. And sellers are finding that there are still buyers in the marketplace, particularly in the private capital sector.
In early December, our team closed a 128-unit property in Omaha that was roughly $15 million and garnered 25 offers. It was one of the most competitive deals we have seen all year from the number of tours, registered buyers, pricing, and overall execution from our buyer. While the profile of the deal was smaller than what most traditional “institutional” groups would be attracted to, the level of competition between buyers on a national level was encouraging.
In some cases, we have seen that buyers willing to get comfortable with less leverage are finding opportunities to assume existing debt at a lower than market LTV. Our team recently brokered the sale of a 150-unit apartment building in Missouri for $19.5 million. In that case, the buyer assumed Fannie Mae debt at roughly 40 percent LTV at a rate of 3.3 percent with one year of interest only debt service remaining. What also is notable about that transaction is that while the existing loan had to be assumed at or around 40 percent leverage (due to a lockout period through 2023), it attracted 15 offers with the winning bid coming from a private East Coast office.
Agencies remain liquid
Despite market volatility, there is still attractive non-recourse debt sources to finance multifamily assets. While 2021 may have been the year of bridge execution, Fannie Mae and Freddie Mac are now leading the way again, and both will continue to provide liquidity to the multifamily market with fresh caps for 2023 set at $75 billion each.
Ultimately, the key to navigating the multifamily market in 2023 will be finding both buyers and sellers that are motivated to transact. Although that is more difficult to do in the current environment, there will continue to be opportunities moving forward into 2023.
CHICAGO, ILLINOIS (October 31, 2022) – As more and more remote workers choose to rent in the suburbs rather than the traditional urban centers, local and out-of-state investors are looking to move into the strong Chicago apartment building market.
The recently closed portfolio of 164 units to New Jersey investors illustrates the demand centered around Chicago, noted Alex Malzone, associate vice president of Northmarq’s St. Louis office (serving the Chicago and the greater Midwest).
“Many local investors are involved in acquisitions of less than 50 units, while national and international firms are investing in larger properties,” he said. “Investors are attracted to the market stability and the diverse economy as well as the long-term growth potential.”
Other topics covered include:
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St. Louis, Missouri (September 6, 2022) — Dominic Martinez has been promoted to vice president – investment sales in Northmarq’s St. Louis office. Martinez joined Northmarq in January of 2021 as an associate vice president – investment sales, where he has focused on advising, marketing, and sales of multifamily assets throughout the Midwest.
In his new role, Martinez will continue working with Parker Stewart, managing director – investment sales, to provide focus and expertise for clients. He will also continue collaborating with Northmarq’s St. Louis debt/equity team. Martinez’ experience includes mastery throughout secondary and tertiary markets across the Midwest, providing clients the ability to access resources outside of local markets to successfully execute on their respective business strategies.
Since joining Northmarq, Martinez has created a name for himself and has been awarded and recognized as a 2021 ‘Power Broker’ by CoStar, within Northmarq’s St. Louis top sales team. He continues to build momentum with clients and deliver high levels of sales volume within his team.
Between the three investment advisors, the team sold 3,600 units totaling ~$500 million in sales and loan production in 2021 across the Midwest.
Prior to Northmarq, Martinez served as an associate director at Berkadia’s Kansas City Office. He completed the sale of over 3,500 units and $300 million in total consideration, comprising of five states across the region. Before Berkadia, Martinez began his career at PricewaterhouseCoopers as an Assurance Associate within the financial services industry, specifically focused on banking and asset management companies.
Martinez graduated from the University of Missouri where he attained a Masters of Accountancy and is currently a licensed CPA.
Recently, Martinez secured the following sales:
MINNEAPOLIS, MINNESOTA (August 31, 2022) – Multifamily developers feeling the squeeze from rising costs are sharpening their pencils and looking for creative solutions to get projects off the drawing board.
Despite the overwhelming demand for all types of housing, developers have been recalculating costs due to a triple whammy of rising interest rates, inflation and supply chain pressures. In some cases, developers are seeing revised cost estimates that are between 20 and 30% higher than what they had originally estimated.
That large delta is forcing some developers to push pause, while others are able to power through by raising rents, adjusting return expectations, modifying designs and value-engineering their capital stack.
Developers continue to find good liquidity in the market on both the debt and equity side, but underwriting is more challenging for both developers and lenders. One question everyone is grappling with is how much of the higher costs can be passed on to renters before it starts to impact lease-up. The answer to that varies depending on the location. Developers building in markets with more robust rent growth are better able to adapt to increases on the cost side.
Although the Sun Belt is attracting a lot of attention for its double-digit rent growth, there are pockets of opportunities all around the country. Some submarkets are experiencing razor thin vacancies of 2-3%. St. Louis, for example, is seeing strong demand for rental housing, including pent-up demand for new builds. Those market dynamics have spurred a surge in development activity over the last four years. Northmarq recently closed on a $46 million construction loan for the 266-unit Flats of Wildhorse Village in Chesterfield, Mo. In this case, the borrower thought rates were likely to rise and chose to do a 5-year fixed-rate loan with a local bank, locking in an attractive rate and taking interest rate risk off the table.
Rising rates impact loan size
Although interest rates are still low by historical standards, financing costs have moved higher along with Fed rate increases. SOFR has increased from about 0.1% in January to 0.9% in late May, while the 10-year treasury has increased from 1.65% to 2.85%. Construction lenders recognize potential risks developers face in this higher cost environment, and they are starting to dig a little deeper on loan underwriting. Some are asking how current the general contractor bids are to confirm the costs reflect the current market.
Another challenge of rising rates is that borrowers will need to bring more money to the deal to layer on top of their construction loan. Rising rates creates a de-levering effect. If a lender underwrites a loan at a rate of 3.75% and then the rate moves to 4.25%, simple math means the loan amount will go down in order to maintain the lender’s target debt service coverage ratio (DSCR). What that means for borrowers is that they may need to work harder to fill the capital stack and limit exposure to interest rate risk.
Value engineering capital stacks
Despite cost hurdles, deals are still getting done, and lenders are willing to be creative and flexible to win business and originate loans. Some lenders are willing to offer a “stretch” senior loan with an oversized first mortgage that is internally tranched into a separate A and B note within one structure. It’s an engineered structure that helps the lender get a little more yield, and it also helps the borrower get higher leverage at a blended rate. Life insurance companies also are willing to do a participating mortgage where they will do up to 90% of the cost and then they share in half of the profit or upside of the deal.
Banks are typically offering up to 65% loan-to-cost on non-recourse loans or up to 75% on recourse financing. Borrowers can still get 80% leverage on a non-recourse loan from Northmarq’s HUD team if they are able to be patient with the longer lead times to get those deals done. Northmarq’s correspondent life insurance companies represent an attractive option as they offer construction to permanent financing. Borrowers can lock in a fixed rate today for a 2-year interest-only construction period, which then converts to a 10-year amortizing non-recourse loan.
Borrowers can find a variety of solutions to help fill any gaps that occur in that capital stack, including mezzanine debt, preferred equity and higher leverage bridge loans. Now more than ever, it’s important to have a very diverse base of financing options. Working with a debt and equity professional will give developers access to a broad base of lenders and financing options, including institutions, banks, debt funds and agency lenders in order to structure the best capital solution as things change in a very fluid market.
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ST. LOUIS, MISSOURI (March 10, 2022) – From an investment standpoint, the Midwest often gets overshadowed at the institutional level by the highly desirable sunbelt and coastal markets. As a result of the competitive bidding environment in these markets, the Midwest apartment sector has stepped into the spotlight, with a surge in new capital that is pushing cap rates into record low territory across the region. The increased demand we are seeing is fueling historically low cap rates and overall pricing.
Last year, Northmarq’s Midwest brokerage team sold $560 million in multifamily assets totaling 5,300 units in six states. That momentum has continued into the first quarter of 2022, with a deep pool of buyers pursuing investment opportunities in secondary and tertiary markets throughout the Midwest. Demand has been heightened by investor’s perceived pricing discount, compared to other markets; we have seen twice as many buyers at the table on nearly every deal, compared to 2 or 3 years ago.
One of many recent examples of the growing investor interest in the Midwest is the sale of Fairways at Lincoln, in Lincoln, Nebraska. Built in 2007, the property’s 613 units offered immediate scale for an out-of-state investor trying to enter a market that does not have high trade velocity historically. The sale closed at the end of last year, after we received 260 signed confidentially agreements from buyers across the country and 24 written offers. While these stats are typical for a similar deal in a primary market, it was extremely competitive for a property located in a Midwest town of only 350,000 residents. The asset ended up selling at a 3.75 percent cap rate, with significant nonrefundable earnest money at the contract execution, and an expedited closing timeline for the market. Investors from across the country were drawn to Lincoln’s strong market fundamentals and the potential for significant rent growth after moderate renovations to the units.
At a national level, multifamily assets posted double digit rent growth with record low vacancies in 2021. According to Freddie Mac’s 2022 Multifamily Outlook, annual rent growth was 10 percent last year, while vacancy rates declined to 4.8 percent. Although Midwest markets might not have the dynamic fundamentals like Phoenix, Charlotte, or Dallas, many local owners are benefitting from exceptional rent growth, in some cases up to 15 percent year over year. Many of our clients that own thousands of units in several states have reported double digit portfolio rent growth over the last 12 months. This staggering year-over-year rent growth is unprecedented in the Midwest.
Cap rates have continued to compress as rent growth and revenue assumptions grow. Currently, our team has multiple Class B and C properties under agreement at cap rates in the low to mid 3 percent range. Last week, we accepted an offer for a 97 percent occupied, 1960s property in St. Louis at a 2.75 percent cap with significant nonrefundable earnest money. Although cap rates have compressed, the overall return thresholds for buyers have stood firm. Inflation has been driving rents. While operating costs are up, increased rents have outpaced expenses, leading to significant increases in bottom line revenue. Buyers remain bullish on their ability to achieve successful yields, even at the aggressive pricing environment in today’s market. If rents continue to surge at recent levels, it is difficult for a property not to appreciate significantly over five to seven years, which will bolster an overall IRR.
Another factor fueling the robust deal flow is good liquidity in capital markets. Lenders across the board, from the agencies to life companies and banks, are eager to finance all types of rental housing. These lenders are bullish on multifamily of all types including workforce and market rate apartments to build-to-rent developments. Northmarq recently closed on a $46 million construction loan for the Flats at Wildhorse Village in Chesterfield, Missouri, a high-end suburb of St. Louis. There was strong demand from both local and national banks in providing the construction loan for this project due to many factors, including multifamily in Chesterfield being highly sought after.
Investors need to keep an eye on several trends that could impact their underwriting. The top-of-mind topic right now for most investors is increasing interest rate environment. However, supply chain issues, inflation, and other factors like the war in Ukraine will also ultimately affect our economy in the long-term. Macro-level rent growth will be heavily analyzed this year, even more than usual, due to the concern that multifamily fundamentals will start to “normalize.”
Is the Midwest a seller’s market or buyer’s market? Frankly, it is both. Investors continue to find good investment opportunities to fit core, core plus and value-add strategies across the Midwest. If the fundamentals we have today are here to stay, there will be many opportunities for investors to double or even or triple their equity position in a relatively short amount of time. On the sell side, current valuations are as high as ever, inciting many owners to consider a disposition while taking advantage of the market. At the end of the day, multifamily is an extremely sustainable investment over time. People are always going to need a roof over their head, especially when times are as challenging as now to buy a home.
ST. LOUIS, MISSOURI (March 1, 2022) – Parker Stewart, managing director and Dominic Martinez, associate vice president of Northmarq’s St. Louis investment sales team recently contributed their insights in a Heartland Real Estate story titled, “Multifamily Brokers Anticipate Another Busy Year.” With multifamily property and portfolio sales nationally totaling $335.3 billion in 2022 (up 128 percent since 2020), it is hard to imagine a repeat of last year’s successes. But that’s exactly what some brokers are expecting. Beyond projections for 2022, other topics included: Optimistic investors, cap rates compressing and worries regarding inflation.
Stewart noted that new sources of capital are entering the Midwest chasing multifamily product. “We have generated twice as many offers on almost every deal that we brought to market over the past 12 months when compared with prior years,” he said. Martinez added that “We’re extremely bullish on the market from a transactional standpoint based on conversations we are having every day with buyers and sellers.”
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ST. LOUIS, MISSOURI (September 10, 2021) – The St. Louis Business Journal recently released its annual “Book of Lists” edition, the region’s only compilation of industry lists featuring the premier companies and business leaders throughout the St. Louis metro area. The Northmarq St. Louis Debt/Equity team, led by David Garfinkel – senior vice president/managing director, topped the list as the most highly ranked lender on the “Largest Commercial Lenders” list.
The rankings were established by analyzing local commercial loans outstanding as of December 31, 2020. During this period, Northmarq recorded $4.49 billion in local commercial loans outstanding, which was more than $1.5 billion more than the second place firm.
The number of offers on recent listings has nearly doubled compared to the last few years, which is pushing never-before-seen, aggressive terms and pricing.
While the COVID-19 pandemic rocked many commercial real estate sectors in 2020, multifamily – although not completely unscathed — has consistently remained a top performer.
This holds especially true for the large, secondary Midwest markets including St. Louis, which don’t typically experience the big swings of the primary coastal markets. The Midwest continues to boast sound fundamentals.
Markets across the Midwest reported fewer apartment delinquencies, notes Parker Stewart, NorthMarq’s managing director of Investment Sales, covering St. Louis and Midwest secondary and tertiary markets. While delinquencies increased in 2020 due to pandemic-related layoffs and furloughs, many apartment operators in St. Louis, for example, reported better collection figures compared to many other primary markets across the United States.
“Year over year, the St. Louis multifamily market recorded 2 percent rent growth and 5.5 percent vacancy, which is pretty consistent with many of the secondary markets in the Midwest,” notes Dominic Martinez, NorthMarq’s associate vice president, focusing on multifamily investment sales across the Midwest. “These are not the high-rent growth markets like Boise and Phoenix, yet they’re very stable.”
St. Louis, like many cities, is still recovering from recent job losses due to the pandemic. Year over year, total employment in St. Louis is down 4.5 percent. While the local employment market remains in recovery mode, employers are expected to continue to add workers back to payrolls in 2021, and there are companies expanding.
For example, St. Louis is a thriving hub for geospatial companies. The National Geospatial-Intelligence Agency is building a nearly $2 billion headquarters in north St. Louis. “This development is expected to be a major catalyst for job growth,” says Martinez.
Hottest St. Louis submarkets
Approximately 3,500 units were under construction at the end of the first quarter of 2021. Newer projects have leased up with minimal concessions, Stewart notes. Active submarkets include Midtown and The Grove, which are seeing strong lease-up of Class-A units. Further west, Chesterfield, St. Charles and Wentzville have seen significant upticks in multifamily development with minimal concessions during lease-up.
What’s fueling investor demand?
As noted, multifamily has held up through the COVID-19 storm compared to other asset classes, and specifically, apartments in the Midwest boast strong fundamentals compared to the primary coastal markets. Additional factors behind robust investor demand include:
Demand increases number of investors at the table
Competition is fierce and cap rates are at all-time lows. Stewart and Martinez have more than 2,800 units listed or under contract in six states across the region and are seeing cap rates that are substantially lower than ever before.
“And specifically, over the last few months, it seems there’s almost double the number of buyers looking at deals,” Stewart notes. “On a property where maybe six months ago we had eight to 12 offers, now it’s likely 20 to 25.”
The level of competition is leading to extremely aggressive terms.
“The end result is we’re seeing terms that we’ve not seen before,” notes Martinez. Additionally, these aggressive terms are not only for newer-built deals in which investors typically feel more comfortable putting down significant dollars. “Now we’re seeing those terms across the board, regardless if it’s a brand-new deal or a 1980s-built, value-add deal in a tertiary market,” Martinez says.
For example, NorthMarq has a $14 million, value-add workforce deal under contract outside of St. Louis with seven figures of nonrefundable earnest money. The buyer is a private family office from the coast. There was no due diligence on the offer and no contingencies on the nonrefundable earnest money.
It’s largely sophisticated private capital pursuing apartment deals in St. Louis and across the Midwest.
“While local investors continue to review investment opportunities, we’re seeing more national buyers than ever before,” Stewart says. “Buyers have been looking to come into the Midwest over the last several years. However, with the stability these middle markets have displayed throughout the COVID-19 pandemic, there’s that much more demand. Plus, the yield continues to consistently be more attractive than a primary market like Dallas or Phoenix.”
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MINNEAPOLIS, MINNESOTA (January 13, 2021) — Nortmmarq’s multifamily investment sales platform, which grew into 15 offices through YE 2020, adds new market-leading investment sales experts in the company’s St. Louis debt & equity office today.
Parker Stewart joins the company as managing director – Investment Sales to cover St. Louis and Midwest secondary and tertiary markets. Dominic Martinez, associate vice president, and Alex Malzone, senior associate, also come to Northmarq to focus on multifamily investment sales across the Midwest. They will partner with Northmarq’s existing debt and equity leader, David Garfinkel, managing director, in St. Louis, along with the company’s other Midwest debt and equity experts in Chicago, Kansas City, Omaha, and Minneapolis.
Trevor Koskovich, president-Investment Sales, leads the business expansion, which added six new offices to-date in 2020. “We look for energetic professionals who are interested in building the platform and being part of the excitement of this quickly growing business. When we found Parker and Dominic, we knew they would be the perfect complement to our strong debt and equity operation in St. Louis and across the Midwest,” he said.
Both Stewart and Martinez are graduates of the University of Missouri-Columbia and natives of the St. Louis area. Stewart brings his previous experience with Berkadia, where he completed the sale of over 7,500 units and $750,000,000 in total consideration, within seven states across the region. Martinez, who will focus on the evaluation, advising, marketing, and sale of multifamily assets throughout the Midwest, has completed the sale of over 3,500 units and $300,000,000 in total consideration. He graduated with a master’s degree in accounting and has his CPA designation.
“I am very excited to join Northmarq and continue the explosive growth of the investment sales group nationwide. The ability to leverage Northmarq’s exceptional local, regional, and national relationships formed over the last 60 years will serve as a strong catalyst for future growth and will give us a competitive advantage in the investment sales marketplace,” said Stewart. “In addition, David has built a dominant mortgage banking team in St. Louis, and we look forward to partnering with them to offer our clients a full range of capital market services.”
The St. Louis office will offer investment sales coverage in conjunction with the other Northmarq offices across the country to market multifamily assets and help clients identify the best financing structure. The Northmarq platform now includes teams in 16 states, with more 60 investment sales professionals.
MINNEAPOLIS, MINNESOTA (December 1, 2020) — NorthMarq’s St. Louis office presented 2020 Community Involvement Grants to two local St. Louis-based non-profits Epic Empowerment and Room at the Inn.
Epic Empowerment, an organization whose mission is to end the cycle of poverty for children and families through its pillars of Housing, Food, Education and Employment, was nominated by David Garfinkel, senior vice president/managing director- St. Louis, to receive one of NorthMarq’s Community Involvement grants.
Epic Empowerment’s grant will support the organization’s emphasis to help children who are experiencing homelessness and poverty via Epic Empowerment’s chapter, Safe Kids MO. The chapter addresses the needs of the more than 4,000 children living in unstable conditions outside the home in Franklin County by providing emergency housing, food and nutritional assistance, and employment. During its existence, Safe Kids MO has delivered more than 260,000 meals to families in need.
“What attracted me to this organization is that they trying to end the cycle of homelessness, poverty, and hunger for children. Todays’ kids are tomorrow’s future and we need to do all we can to help kids, whenever possible,” said Garfinkel.
The St. Louis office’s second grant was presented to Room at the Inn. The non-profit organization provides immediate, temporary shelter to homeless women and families in the St. Louis region. In addition, the non-profit works with clients to create an individualized plan to return to self-sufficiency, which includes monitoring and referrals to other human services agencies.
“We are very grateful for the donation we received today from NorthMarq,” said David S. Weber, executive director. “Our goal is to place our clients into permanent housing within 45-60 days. Our shelter model is very unique in that we partner with 50+ interfaith congregations who house our clients each night at their facility. Our clients have a safe and clean place to sleep, are served dinner and breakfast, and then brought back to our shelter for programming until 5 pm when the process begins again…365 nights per year.”
In the third year of NorthMarq’s Community Involvement Grant program, the company has awarded grants to 18 non-profits in 16 cities. The program solicits nominations from each local office, and had an increase of 20 percent from 2019, with a total of 18 non-profits focused on affordable housing and reducing homelessness receiving these grants in 2020.
The St. Louis Business Journal recently released its list of largest commercial lenders. The lenders were ranked by local commercial loans outstanding as of December 31, 2019. The Northmarq office, led by David Garfinkel, managing director, received the top tanking, beating out 30 other companies. Click here to view the story.
ST. LOUIS, MISSOURI (January 31, 2020) – Midwest Real Estate News released its list of inductees for the Commercial Real Estate 2019 Hall of Fame. David Garfinkel, senior vice president/managing director of NorthMarq’s St. Louis office earned a spot in the class of 2019 alongside a select group of real estate professionals who have impacted both their industry and community.
During his 32-year career in commercial real estate, Garfinkel has arranged more than $2.75 billion in loan production. For this reason, several life insurance companies have recognized him as top producer throughout his career. He consistently ranks among the top-10 in production at NorthMarq.
“I love what I do, as every day is different and every deal is different,” Garfinkel said. “I might work on loans for five different property types every day. However, what I love most about this business is the people. I’ve developed long-term relationships and friendships with many of my clients, my lenders and my colleagues within NorthMarq and the real estate industry.”
David Garfinkel in our St. Louis office celebrates 20 years with the company this month. Thanks for being part of the team, David!
ST. LOUIS (January 7, 2019) – NorthMarq Capital was ranked by St. Louis Business Journal as first of 25 in the 2018 Largest Commercial Lenders listing, which was determined by local commercial loan volume as of December 31, 2017.
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