2022 was a big year for apartment acquisitions

BY KIRK PINHO

Apartment transactions dominated investment sales in 2022, but some are saying rising interest rates have crushed deal ow so far in 2023, leaving this year in limbo.

Of the 56 known property sales clocking in at $10 million or more across Wayne, Oakland, Macomb, Washtenaw and Livingston counties, 27 of them were for apartment buildings.

All told, there was just north of $2 billion in sales across those transactions ranging from o ce to multifamily, industrial to hotel space, which were submitted to Crain’s by brokerage rms and landlords around the region. Multifamily sales accounted for just over $1 billion of that gure.

But, don’t expect this year to wind up with that kind of deal ow, said Greg Coulter, managing member and founder of Bloom eld Hills-based Income Property Organization, a multifamily brokerage house. He said low interest rates in recent years plus demand for new housing and rising rents all contributed to high acquisition volumes recently.

Rising rates from the Federal Re- serve starting last year have started to quash acquisitions.

“ e party’s over, but it was a heck of a party,” Coulter said.

In the rst quarter this year, his company’s deal volume is down 75 percent from Q1 last year, and he anticipates it to be down 85 to 90 percent in the second quarter.

“It’s just a totally di erent world today than it was 12 months ago,” Coulter said. “ e record sales of last year are no more.” e appetite for multifamily deals in recent years shouldn’t come as much of a surprise. e asset class weathered a potential storm — with the help of the federal government — as rent payments remained largely consistent in the early days of the pandemic as many Americans received relief checks.

In addition, rising rents have made the sector attractive to investors, including those who looked to commercial real estate investment as bonds and other types of investments were not paying o as much.

“We’re coming o a period of the cheapest interest rates we’ve ever had as a society,” said Joshua Bernard, principal of South eld-based Bernard Financial Group. “A lot of people were looking to put their money into commercial real estate, and multifamily is often considered, rightly or wrongly, the easiest class of real estate.”

“As (real estate) prices were going up, you could get into stu with cheap nancing,” Bernard said. “ e agencies, Fannie (Mae), Freddie (Mac) and HUD, were having record years of originations. You also had the government buying mort-