By Tim J. Randall
When the 30 years of real estate experience between Jim Crews and Brett Polachek hone in on the Arizona multifamily space, they see a healthy, recovering and vibrant market. This multifamily team works on the national platform of Cushman & Wakefield and has completed more than 118 transactions totaling over $1 billion since 2005.
There is a discernible optimism in this team’s approach to the real estate recovery, based on recent market patterns.
Carving a Niche
In the multifamily sector, broker teams normally deal in multiple aspects of the business. However, each typically develops a core interest in which he or she has a reputation, specialization or comfort level. For the Cushman & Wakefield duo this niche is larger institutional and private capital transactions. The group’s focus is on multifamily buildings over 150 units, most built after the 1980s throughout the state. While the team works on the Phoenix area, it currently has listings in Tucson and Flagstaff, and has transacted deals in Payson, Bullhead City and New Mexico.
Over the last several years, buildings have been purchased by investors looking for internal rates of return of 15 to 18 percent. The property is purchased and $4,000 to $6,000 per unit is spent on upgrades. Unlike the frothy days when a quick sale was common, the investor holds on to the property. The investor returns are further enhanced by low borrowing costs and leverage in the 70 to 75 percent range. Crews and Polachek describe this new market pattern as investors looking for cash flow consistency and upside appreciation potential. They estimate this “buy-and-hold” strategy will continue for the next three to five years.
As long-time observers of the multifamily industry, the Crews-Polachek team sees the drivers of the recovery in place and poised for a continuing upward trajectory.
“Jobs, capital, liquidity and a favorable business climate are all fundamentals that attract buyers to the Phoenix market. Currently, there are more buyers than sellers, more demand than supply,” says Crews.
Looking at multifamily in aggregate, the team sees a continuing build-up of “A” space properties in the coming few years.
The brokers marvel at the development in what they call the “L” space – heading south on Scottsdale Road from the Princess Hotel and east towards Chandler.
The new focus seems to be the upper tier luxury apartments, including granite and stainless amenities.
Crews and Polachek cite a project at 68th Street and Camelback Road as an example of such a building with an 18,000 square foot fitness center, exhibition kitchen and other high-end common area amenities.
The next several years appear ripe with opportunities for the Cushman & Wakefield team, as the duo possesses experience in all aspects of the multifamily space including conventional apartments, condominium conversions and reversions, student housing, senior and assisted living communities, and high-density residential land.
Though 90 percent of the group’s deal flow is in Arizona, 80 percent of it comes from Phoenix; a preponderance of buyers are out-of-state investors and even Canadians. The group uses an internet marketing approach for listings and information dissemination, which attracts national and international buyers. They call this “entrepreneurial capital in search of cash yields.”
With 12 to 15 deals totaling nearly $200 million closing in 2013, there is every reason to believe this dynamic team will capture the opportunities of this recovering market and battle for a top position in the commercial brokerage arena.