Gebroe-Hammer Associates finished the first quarter of 2023 with 17 multifamily sales with a combined value of more than $182 million, including an undisclosed New Jersey garden apartment property that was part of a roughly 230-unit portfolio trade in southwest New Jersey and greater Philadelphia. — Courtesy: Gebroe-Hammer
By Joshua Burd
An investor has acquired some 230 apartments in and around southwestern New Jersey, capping off more than $182 million in first-quarter deals brokered by Gebroe-Hammer Associates.
The Livingston-based firm completed 17 investment sales during Q1, arranging the trade of a combined 1,247 rental units throughout New Jersey, greater Philadelphia and New York State. Brokers say the activity reflected the resilience of the apartment sector, whose fundamentals held up well through the interest rate hikes of 2022 and early 2023, creating continued opportunities for investors like the buyer of the undisclosed South Jersey portfolio.
In the transaction, the firm said it represented the unnamed seller and procured the purchaser, which was attracted by the properties’ upside and repositioning potential.
“Commercial real estate investing in general — like any sector that is dependent upon lending as its primary capital source — underwent a correction of varying degrees, based on asset type,” said Ken Uranowitz, Gebroe-Hammer’s longtime president. “Multifamily remained solid, as it always has — for decades, no matter the cycle thanks to its basic function as shelter.”
The firm’s Q1 deals included trades focused on in-demand, commuter-friendly counties in northern and central New Jersey — including Union, Essex, Bergen and Mercer. It also completed sales in and around Philadelphia, including a recent $40 million deal involving more than 250 units in Lower Bucks County, Pennsylvania, along with New York’s Westchester County.
“The post-summer 2022 watch-and-wait approach has evolved into a measured re-entry for investors, who are proceeding with a renewed sense of confidence, albeit with caution as the Fed continues on its course of rate increases amid some banking turmoil,” Uranowitz added. “This is being fueled by a still buoyant labor market, positive income growth and a single-family housing sector that underwent — and continues to undergo — its own cooling and correction.”
Gebroe-Hammer Executive Managing Director David Oropeza noted that pricing and capitalization rates are adjusting accordingly, but said quality, value-add and in-demand transit locations continue to sell. For example, he recently brokered the $12 million sale of two historic midrise properties in East Orange, both of which are within walking distance of the city’s Brick Church station, the target of a focused redevelopment effort that bodes well for existing property value-add repositioning.
“Connectivity and proximity to employment hubs translate into favorable returns for the buyer and positive long-term tenant demand for many years to come,” Oropeza said. “The arrival of spring and the promise that it lives up to its reputation as the prime leasing season is even more cause for multifamily investment exuberance. These characteristics pretty much fit virtually every urban or suburban municipality across New Jersey, the Philadelphia MSA and New York State.”
The brokerage also highlighted the continued appeal of suburban garden apartments in the region, including the 80-unit Grand Lee Apartments in Leonia that changed hands for $19.8 million. Gebroe-Hammer Vice President Joseph Gehler and Sales Representative David Betesh brokered the trade, noting that for-sale assets in the submarket are hard to come by.
“In general, developers are still building and delivering new product throughout New Jersey,” said Joseph Brecher, an executive managing director with Gebroe-Hammer. “Rent growth is normalizing and people are choosing to or are forced to rent longer due to the rapid rise in interest rates and an undersupply of affordable single-family homes.”
Uranowitz added: “We are going through an adjustment period which normally occurs after uptick cycles, as has been the case since the beginning of time.”
“For the past 10 years, the cost of capital was half of what it is today. This trend, plus an abundance of dry powder parked during the COVID shutdown that was redeployed in record amounts, contributed to the latest cycle, amongst other economic factors,” he said. “What is certain, having done this for almost 50 years, is that these cycles are never permanent.
“How long this particular period lasts, no one can predict. The one thing I do know is that apartments have remained the one real estate asset class that is the least affected by downturns in the economy. Having closed 17 deals in the first quarter affirms this phenomenon.”