Most are family-based companies which for generations have succeeded by sticking to a time honored strategy: buy and hold forever. However, at this point in the cycle is the market strong enough for owners who claim never to be sellers to reconsider?
Large private owners often have complex ownership structures in place designed to maintain the integrity of the business for decades. The ownership structure and overall strategy makes selling a consideration only in the rarest of circumstances. In looking at several recent transactions in the market, it is evident that a tipping point has been reached. Long-term investors are seeing that the buy and hold strategy is not providing the kind of return on equity they could be getting in this market, and are choosing to take advantage of the current conditions.
What does this mean for the average apartment building investor? It means selling at a price that will seem fair for years to come is achievable. The current state of the market has allowed many investors to preserve capital and improve returns. Long-term owners are selling and exchanging into another, typically larger, property. This not only preserves their original equity without taxation, but allows them to build more wealth over time. Although each owner has an individual set of investment objectives, one thing everyone benefits from is a liquid market for apartment buildings.
While refinancing and reinvesting the proceeds in new projects remains the most popular option for large private owners, I expect more and more properties owned for 15+ years will start appearing on the market. The timing is right and savvy investors are seeing it.