After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade

CHAPTER FOUR

THE MULTIFAMILY MARKET

Slowing but stable fundamentals ahead; Apartments will be the place to be in the next decade

 

 

Early in 2007, just a few months before the subprime mortgage blowup and subsequent credit crisis, two huge real estate deals were completed and announced. The first, the $39 billion purchase of Equity Office Properties by the Blackstone Group is the most well known. That’s mostly because after the purchase, the Blackstone Group flipped billions of dollars worth of properties to help pay for the deal and the subsequent buyers such as Harry Macklowe were the ones caught holding the debt when financial markets suffered paralysis.

The second deal, the Lehman Brothers Holdings Inc./Tishman Speyer Properties purchase of multifamily real estate investment trust Archstone-Smith for $22 billion, has for the most part stayed below the financial press radar. This doesn’t mean it was a success. In many, many ways, this deal was badly done.

The largest public to private merger and acquisition transaction done in the multifamily REIT sector came much too late in the cycle and wasn’t well thought out in terms of recouping investment costs. The Blackstone deal was completed in February 2007. The Lehman/Tishman acquisition wasn’t announced until May 2007 ( just ahead of the subprime residential lending market collapse) and not completed until October 2007, when the ...