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California  + Finance  | 
Dealmaking activity abounded at the NMHC Annual Meeting in Orlando

Safer Multifamily Investments, Selection Bias Keeps Q2 Cap Rates Down

Despite continued increases in the Fed’s borrowing rate since December 2016, apartment cap rates have barely registered a change. A report by Reis shows the mean apartment cap fell 30 basis points in Q2 2017 to 5.7% from 6% in the three previous quarters. The mean 12-month rolling cap rate was unchanged in Q2.

The main reason cited for a drop, after three quarters of flat cap rates AND after the bumps in the fed funds rate, is investors see the apartment sector as a safer investment when interest rates climb – thus pushing down cap rates.

Additionally, Reis says, selection bias has kept cap rates lower throughout the year. Cap rates reflect the properties that traded in the quarter, and those that traded were likely “better” properties in safer submarkets relative to previous quarters. A lower average cap rate is consistent with the higher effective rent growth experienced in Q2 too.

For comments, questions or concerns, please contact Dennis Kaiser

Connect

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About Dennis Kaiser

Dennis Kaiser is Vice President of Public Relations and Communications for Connect Creative. Dennis is a communications leader with more than 40 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect Creative’s agency client services and is involved in a range of initiatives ranging from public relations and content strategy, communications and message development, copywriting, media relations, social media and content marketing services. Prior to joining Connect Media in 2015, his most recent corporate communications roles involved leading a regional public relations effort across Southern California for CBRE, playing a key marketing role on JLL’s national retail team, and directing the global public relations effort at ValleyCrest (BrightView), the nation’s largest commercial landscape services company. He has worked on marketing communications assignments for such CRE companies as Blackstone/Equity Office, Carlyle, Caruso, Disney Resorts, GE Capital, Irvine Company, Hines, Howard Hughes Corp., Jeffries, Lennar, MGM, Marcus & Millichap, Prologis, Raleigh Studios, Simon, Starwood, Trammell Crow Company, Transamerica, UBS and Wynn Resorts. Dennis has also worked on communications and launch strategies for a number of consumer electronic, media and tech brands including SlingMedia, Channel Master, Deluxe Media Entertainment, BeIn Sports, EchoStar and Sprint. Dennis’s agency background included firms such as Off Madison Ave., Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, Boy Scouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and the Thunderbirds Charities.

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