Summary:
In a challenging environment for developing new commercial real estate, The Bozzuto Group, in partnership with Invesco, is launching a $1 billion initiative to acquire existing multifamily assets on the East Coast. The strategy focuses on rehabilitating undervalued properties to make them competitive with newer developments. Greg Krause from Invesco noted that this approach aims to capitalize on market recovery by enhancing valuable assets.
The initiative comes amidst an oversupply in the multifamily sector, fueled by a construction boom during the pandemic. Despite high interest rates, Bozzuto CEO Toby Bozzuto believes this oversupply is temporary and can turn into an affordable solution long-term. He emphasized that purchasing older buildings often costs 10% to 20% less than constructing new ones, allowing for quicker market entry without facing extensive regulatory hurdles.
Experts anticipate that the oversupply will correct in a few years due to demographic shifts and high condominium prices keeping renters in place. A recent Berkadia study revealed that 87% of multifamily investors remain optimistic and plan to expand their portfolios despite current challenges such as rising mortgage delinquencies affecting valuations.
Bozzuto remains confident that while some properties may encounter issues related to leverage and transitions to permanent loans, overall opportunities will persist. His focus is on acquiring ‘value-add’ properties up and down the East Coast, with an expectation that improved management and renovations will lead to increased rents over time. He anticipates a future rebound for both the multifamily sector and new developments.
