Economic Development

Realtors Calling "The Age of Multifamily" Residential Development As North Carolina Sees the Impact

Multifamily residential is hot.  Real hot. 

What’s multifamily residential?  In its most common form, it is an apartment complex.  According to the National Association of Realtors, “The 10’s are the apartment decade.”  In other words — well, in financial-speak — “[M]ulti-family has become the darling of commercial property investors, whose seemingly endless appetite for product has pushed cap rates for Class A properties below 5 percent in many top markets.”  Translation:  Investors are so hungry for multifamily residential opportunities in good markets, and you can probably divine what those markets are, those investors are willing to accept a lower rate of return simply to crack the good markets.

Why is this?  Well, you’ve probably seen the “rent v. buy” articles floating around on the web and in print, in which “rent” will sometimes win, but the answer may be quite simple.  By some research, renter demand justifies investor exuberance for multifamily.  It’s been cited by MPF Research in Dallas that “[n]ational apartment occupancy averaged 94.6 percent at the end of 2011, almost three percentage points higher than the bottom point at the end of 2009.”

The Southeast in general, and North Carolina in particular, is riding this wave.

Here is a very small sampling of some transactions and news in the multifamily and apartment “space” in the Triangle region of North Carolina — Raleigh, Durham and Chapel Hill — since only August of this year.

A 360-unit multifamily apartment complex in Durham was purchased for $28.1 million.

A 393-unit multifamily apartment complex in Cary was purchased for $54 million.

A 160-unit multifamily apartment complex in Chapel Hill was purchased for $11.6 million.

A 186-unit apartment complex in Durham was purchased for $22 million.  The same complex was purchased 25 months ago for $17.55 million.

A 188-unit multifamily apartment complex in Carrboro was purchased for $11 million.  The purchase price is more than 10% over the tax value of the complex.

A developer is looking to expand the size of its planned multifamily project in Durham.  Instead of the 88 units planned at a cost of $10 million, the developer is now looking to build 183 units at a cost of more than $20 million.

A Chapel Hill developer is planning an upscale, 125-room hotel and 68-unit multifamily apartment building project in Chapel Hill.


This matters to the investors, the residents and to economy at large but it also matters to lawyers and their clients as well as lawmakers at the state and local level.  There are many political, legal and financial issues to navigate when purchasing, developing, or modifying any real estate.  And multifamily residential is no exception.

It will be interesting to see the issues that arise and solutions we develop as multifamily transactions–whether purchases, refinances or with local governments–continue to grow momentum.

Mike Thelen is a lawyer in Womble, Carlyle’s Real Estate and Land Use Litigation practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Categories: Economic Development

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