Where readers ask and we try to answer:
There must be many of you brokers out there who are familiar with the Lembi juggernaut. Well, word is that they are adjusting to a changing financing landscape and even, gasp! selling some units. Maybe that will allow some of us little guys to get a shot at buying some of the multi-unit buildings around town? Any thoughts?
Well, Paco, whatever word on the street you are hearing must have some truth to it, as we’re hearing the same thing. We are not reporters, don’t pretend to be, and frankly don’t feel like “glamming” this post up, so we’ll give some bullets:
* Trophy Properties has currently listed multiple properties
for sale. As a result of a slipping market the buildings are arguably
priced above current market values.
* With shifting values and adjustable loans there are rumors that
the company is having trouble keeping up.
* Most of Trophy’s purchases in recent memory were done with short
term, highly leveraged adjustable loans, which are believed to be
resetting.
* Trophy has purchased approx. 85% of the buildings, with 10 or more
units, in the last two years. This aggressive buying has “frustrated” a
lot of SF investors. Many competing Buyers are licking their
chops waiting for more properties to come back to the market. However,
because of high prices, most of the properties are not
attracting serious investors.
* This uncertainty is creating a “standoff” in the 10+ unit market,
as Sellers are waiting to see how listed properties sell before listing
their own, and investors are not moving on recently “listed” properties
because they are so expensive.
* Many local Agents are all wondering, “how will the market react to
disparity between Sellers and Buyers.”
That from a highly connected source in the multi-unit world.
what a great blog! thanks for the info. maybe prices will start to align with rent potential again.
[Editor’s note: That is a safe bet. Now spread the word about theFrontSteps, and if you have your eye on any buildings in particular, you know where to go.]
Look at what the Lembis are selling, they are getting rid of anything that is not a trophy building. Their push for the last decade has been very specific, been to own every trophy and view property in town. ( my own focus as well, less funded)
Multi-building that are comprised of studios and one bedrooms, buildings less than four units, and big commerical buildings ( TLOIN) asll the stuff that is not luxury rentals, are the buildings they have been throwing on the market.
The Wall street crisis will show up when the Lembi’s put pretty property on the market.
All the dumping may be a signal wall street has closed their investment checkbook on new acquisition for the Lembis. The flood of property may just be a way raise capital to carry their own paper, or to eliminate marginal property to keep profit margin away fromthe most risk.
For the Lembis, all their purchases have driven comparable sales prices way, way up.
They seem to have a system that works.
Atleast rents are going up here, like NYC and Boston, but unlike most of the country…
http://money.cnn.com/2008/01/16/real_estate/rents_flat/index.htm?cnn=yes
A letter to the editor in the SFBay guardian today by Ted Gullicksen of the Tenant’s Union: http://www1.sfbg.com/printable_entry.php?entry_id=5436
There is a state bill to repeal rent control on the docket for the June ballot. Whether or not you believe that rent control actually contributes to high rental prices is up to you. I personally happen to think rent control has backfired. It has made available apartments very expensive, and it has made empty multi unit buildings prohibitively expensive while making multi-unit buildings more succeptible to Ellis Act. Others think the opposite. Regardless, this could be a doozy.
typical gullicksen spin. the measure only eliminates rent control once people leave their rent controlled apartment. those who stay face no changes whatsoever. gullicksen makes his money by taking our tax dollars. a parasitic relationship with the city and its denizens, at best.
From Fitch Ratings press release regarding a CDO debt instruments which includes Lembi mortgages, March 14, 2008:
“The higher weighted average expected loss of the CREL is attributed to the three Fitch loans of concern. The pool consists of two multifamily portfolios (6.22% of the portfolio) totaling 11 properties sponsored by affiliates of the Lembi Group, which owns an estimated 8,200 units in over 300 properties in the San Francisco, California market. Recent reports have indicated that the Lembi Group is seeking to reduce short term debt by offering for sale 18 of its properties. Based on recent portfolio performance information, Fitch reduced stabilized cash flow expectations on several properties. Fitch further increased the expected losses on these loans in its model to account for the uncertainty in the overall marketplace.”
http://biz.yahoo.com/bw/080314/20080314005809.html?.v=1