As a provider of joint venture and general partner equity, real estate investment firm RanchHarbor has been seeing an influx lately of multifamily investment opportunities presented by sponsors as value-add. However, upon a closer look at the underwriting, these deals do not actually fit the typical value-add investment profile, says Adam Deermount, co-founder and managing director of the company. Instead, these opportunities end up being cap rate compression plays under the guise of value-add and are priced to perfection in today’s market. “Most of the return on investment is generated by rent inflation buoyed in the early years of the investment by positive debt service arbitrage due to interest only terms,” Deermount says.
Read more...Multifamily: An Unassailable Asset Class Develops Some Cracks via GlobeSt