State of the Multifamily Market in Atlanta with Barden Brown!

In this episode of the Peak Market Watch...

We are excited to have Barden Brown as a guest speaker! CEO of Peak Financing Anton Mattli, together with this week’s co-host Feras Moussa, will dive into what Barden is currently seeing in the Atlanta market deals activity for the 3rd quarter, changes in buyer behavior, and the State of the Multifamily Market in Atlanta!

Barden Brown, barden@brownra.com

https://www.brownra.com/

VIDEO TRANSCRIPTION

00:00
calls on the current market environment
00:02
this is anton madley co-founder and ceo
00:05
of peak financing and my co-host today
00:07
is ferris musso
00:09
one of my fellow board members who is
00:11
also principal with disrupted equity
00:14
which actively invests in and manages
00:16
multi-family properties
00:18
we are honored to welcome barton brown
00:21
who is managing director with grace john
00:23
brown real estate advisors in atlanta
00:26
pardon has been involved in the
00:28
marketing and sale of multifamily
00:30
properties in excess of 1.1 billion
00:33
dollars
00:34
uh welcome barton it is a pleasure to
00:36
have you on today
00:37
uh why don’t you give us a little bit of
00:40
a background about your career
00:43
oh yeah absolutely burden brown i’m at
00:45
gravestone brown
00:47
we’ve been in uh apartment brokerage for
00:49
uh about
00:50
uh 15 years or so the company has been
00:53
open for
00:54
uh longer probably about 40 years but i
00:57
myself started
00:58
in i think the spring of 6 of
01:01
06 and are based in atlanta georgia
01:05
and typically focus on assets built in
01:09
1990
01:10
and older although there is some newer
01:12
assets and secondary and tertiary
01:14
markets around georgia and the southeast
01:15
that we work on as well
01:17
but i’d say our niche our bread and
01:18
butter is in the atlanta msa
01:21
and assets built in the 60s 70s 80s and
01:23
maybe early 90s
01:26
yeah that’s true i’m glad to have you on
01:29
i mean like we mentioned yeah
01:31
a little bit of a powerhouse in atlanta
01:33
so definitely
01:34
atlanta’s got a lot of interest almost
01:36
too much interest i keep joking that i’m
01:38
about to get priced out of atlanta so
01:40
glad to have someone kind of really be
01:42
able to dig in and tell us more of what
01:43
we know about atlanta
01:45
yeah sure happy to do it happy to be on
01:47
uh it’s my pleasure to be uh on your
01:49
program
01:50
absolutely right so obviously uh
01:54
it’s on everyone’s mind calling 19 right
01:57
and
01:58
everyone uh is wondering how the various
02:01
markets
02:02
have evolved during that period so maybe
02:04
you can give us a little bit of a
02:07
of a snapshot of how how
02:10
this year evolved compared to last year
02:13
and where
02:13
where we stand right now yeah sure
02:17
so from a covet standpoint uh
02:20
you know like many sunbelt states uh
02:23
atlanta and georgia were
02:24
spared pretty early on and then had a
02:27
really big spike
02:28
in july and august uh right now covet is
02:32
pretty stable it’s not going up at the
02:34
moment
02:35
but looking at some of the trends from
02:38
other states it’s you know it’s
02:39
possibility that terms at any given
02:41
point
02:43
but you know as it relates to
02:46
multi-family
02:48
we had a complete shutdown in in our
02:51
march and through april and i would say
02:54
we started to see
02:55
deal flow trickle back in in may a
02:58
little bit to june a little more
03:00
and then by july and august uh really
03:03
the market was back
03:04
i would say now when i say that 50 of
03:07
the market i’d still say is on the
03:08
sidelines
03:09
maybe 40 or 50 but that’s still more
03:12
than enough to make a market
03:14
uh you know as far as transaction volume
03:16
goes it’ll certainly
03:18
be a lesser year than it was in 2019
03:21
but uh the third quarter is one of our
03:23
better quarters we
03:24
we’ve had uh the second quarter though
03:27
we didn’t have a single closing
03:28
almost everything that we had for april
03:31
actually i take that back i think we
03:32
actually may have had one right at the
03:34
end of june
03:34
as i say that but there wasn’t a 90-day
03:37
period without closings
03:38
at least uh but most of the deals we we
03:41
picked back up they were put together
03:43
there were three of them that are
03:44
probably we are fair to say are
03:46
not going to happen at this point but
03:48
out of about 13 or 14 that were in the
03:50
pipeline at that point
03:52
almost all the other ones have closed
03:53
now so that’s some strength in the
03:55
market that
03:56
uh i think that shows that there was
03:59
some real nervousness
04:00
for a very very good reason but uh
04:04
you know it seems like the multi-family
04:06
trends continue to be pretty positive
04:08
i think there was an another little bit
04:10
of a wave of a spook a mini spook i
04:12
would say
04:13
in early or yeah maybe late august early
04:16
september is enhanced unemployment was
04:18
burning off
04:19
you know how bad would the bad debt
04:21
collection loss really be without that
04:23
but you know as we’ve seen talking
04:25
through some of the larger management
04:27
companies in atlanta
04:28
province meridian s p r james
04:33
almost all of them to a t have said the
04:35
last 60 days have been stable or up
04:38
so we feel pretty good about the health
04:41
of the market
04:42
and then obviously hoping for a little
04:43
bit more federal stimulus in 2021
04:46
yeah we’ve seen i mean we’ve seen we’ve
04:49
seen the
04:49
the numbers still look good what’s
04:51
interesting though is most management
04:53
companies haven’t been writing off the
04:54
bad debt so i’m really curious to see
04:56
once they start writing it off that is
04:57
the truth
04:58
to me i ultimately like cash in the bank
04:59
right what got put in right that’s the
05:01
uh
05:02
that’s the thing i think a lot of people
05:03
overlook and so i’m curious to see where
05:05
that shakes out but
05:06
yeah i want to go really quickly
05:09
actually though to the deals that you
05:10
did have
05:11
was there essentially did buyers expect
05:14
concessions and did you did that happen
05:15
or you guys were able to kind of work it
05:17
out pretty
05:17
amicably without without much of that um
05:22
if it was under agreement uh actually
05:24
with a signed
05:25
uh psa it either closed at full price or
05:28
didn’t
05:29
uh you know that every buyer there asked
05:31
uh for an extension
05:33
and you know maybe a tolling period
05:35
which is just an extension of all dates
05:37
uh
05:38
and then 60 days later they wanted a
05:42
reduction in price the seller didn’t
05:43
give it any single deal that i’m aware
05:45
of
05:47
the buyers made a calculated decision to
05:49
say hey things still look pretty good
05:50
this is a price that we could live with
05:53
before we feel like in our hearts we’re
05:55
deserving of one
05:57
but we’re going to move forward with
05:58
that and they’ve all been rewarded so
06:00
far
06:01
for deals that were not under agreement
06:03
i would say there was a period
06:04
in you know maybe june and july
06:08
where i think most of the people that
06:09
did step up uh to buy the properties
06:12
that were
06:13
on the market did get a discount uh not
06:16
10
06:16
for the most part maybe somewhere
06:18
between four five or six or seven
06:20
at most so i think that those were
06:23
trading at pre-covered levels
06:25
uh there might be still some tiny
06:28
discount
06:29
that’s depending but for the most part
06:31
cap rates are down
06:33
you know i would say nearly 100 basis
06:35
points
06:36
so you know for if anything pricing is
06:39
probably higher than it was
06:40
no it absolutely is right being on the
06:42
buy side atlanta’s gotten more expensive
06:44
not less
06:45
unfortunately the cheap debt that’s out
06:47
there is it’s it’s compounding that
06:49
problem right and so
06:50
you know i got to get behind getting
06:52
more comfortable paying up right the
06:54
problem is it gets kind of weird to
06:55
where you’re starting to approach
06:56
housing prices right
06:57
that’s ultimately why you know if you’re
07:00
paying 150 000 a unit
07:02
if i can buy a house not far from that
07:04
right
07:05
just because my debt is better on
07:07
multi-family you know why do one or the
07:09
other so it gets kind of
07:10
it starts to get complicated really
07:11
quickly on that space
07:13
yeah no i think that’s an interesting
07:14
point go ahead anton
07:17
yeah so uh you you mentioned uh i think
07:20
three
07:20
three deals that didn’t close uh
07:24
so what was the reason why why you had a
07:27
roadblock there
07:30
um let’s see in one case
07:33
um there was just a kill letter that
07:36
came in on a friday afternoon
07:38
i didn’t even know about the kill letter
07:39
for probably a week i wasn’t copied on
07:41
any correspondence uh
07:44
in that time period a lot of bad blood
07:47
was
07:48
uh formed and there was a very very
07:50
large seven figure deposit
07:53
and uh that’s probably going to
07:56
litigation
07:58
that’s one of them another one
08:01
was one where they had recently
08:04
very very recently gone hard on their
08:07
deposit
08:08
but there seemed to be some nuance
08:12
or at least vagary i should say of
08:15
whether
08:15
there was a financing contingency or not
08:18
there certainly wasn’t one
08:19
that was strictly expressed but there
08:21
was some title review period for the
08:23
lender
08:25
there was just a little bit of
08:27
disagreement on that
08:29
uh we did pick together the pieces of
08:30
that one eventually
08:32
and they did try to make it together but
08:34
uh there was some belief that the seller
08:36
may
08:36
not maintain the property and the
08:38
sellers tend to
08:39
agree they just said i’m moving on and
08:41
i’m just going to fix up the property
08:42
myself
08:43
so it became a bit of uh just both sides
08:47
agreed that it just the deal didn’t work
08:48
anymore
08:49
after being neglected for four months
08:51
and the seller said i’m just going to
08:52
renovate it myself okay so based on what
08:56
i hear here it’s
08:57
not none of them are really corvette
09:00
specific
09:01
right that could have happened even
09:03
without call it
09:04
just that somehow they didn’t agree to
09:08
uh to what their original views were
09:11
on both sides well there’s truth to that
09:14
of why they’re not coming together but
09:16
in my opinion at least both of them
09:19
didn’t happen
09:19
due to covid uh i mean they they were
09:23
had no sign of not closing before this
09:26
and
09:26
kill letters were sent um you know that
09:29
much explanation
09:30
uh you know right as everyone was in the
09:32
middle of a quarantine in early april
09:34
um but then the reason the pieces
09:37
you know didn’t get put back together in
09:39
these cases were not covered there were
09:41
not
09:42
a fear that the collections weren’t
09:44
going to be made
09:45
it wasn’t that the buyers just got cold
09:47
feet it wasn’t really
09:49
anything like that in one case it just
09:51
was bad blood and the other one was
09:53
a property that was already sixty
09:54
percent full in a complete
09:56
distress before covid it just became
09:59
more distressed
10:00
yeah yeah okay also
10:04
go ahead no i was gonna say so so right
10:06
now right most brokers have been winding
10:08
down right kind of hunkering down for
10:09
the holidays so to speak
10:11
kind of what are the deals that you’re
10:13
seeing right now and really what do you
10:14
think q1 is going to look like right
10:16
do you still think it’s going to be the
10:18
traditional things are getting pent up
10:20
waiting for the hypothetical nhmc that
10:22
hasn’t been canceled yet
10:24
and then to blast them out after that or
10:26
kind of what are you thinking
10:27
you know the remainder of this year as
10:29
well as q1 is going to start to look
10:30
like
10:32
you know i think that um can you see me
10:34
right now i’ve got someone calling in
10:36
i’m going to no
10:37
it’s when i think of someone yeah there
10:38
we go now okay um
10:41
so uh i think we just launched clifton
10:44
glenn i think we’ll launch one more
10:46
deal this year uh beyond that i think
10:48
we’ll tell anyone else that comes here
10:49
as it
10:50
nears us near us that if at that point
10:53
you really want to it probably makes
10:54
sense to hold to january
10:56
i definitely could think of a deal or
10:57
two that i think we’ll be launching in
10:59
january too early to really say for
11:01
certain
11:02
but i you know i i’m pretty optimistic
11:04
that january’s gonna see quite a bit of
11:06
product on the market
11:07
uh i don’t know that for a fact but my
11:10
read of it is that there will be
11:12
a lot of people think that hey it won’t
11:14
have this big rush like an mhc where
11:16
everyone gets together and
11:17
a lot of product hits the market but i
11:19
think that misses the point of what
11:20
really happens is everyone
11:22
you know goes back home and for the
11:24
holidays and eat some pumpkin pie
11:26
and they take some time off and they’re
11:28
energized and they’ve got equity
11:30
uh that they’re looking to place and i
11:32
think that dynamic will be there
11:35
uh you know there’s some things that
11:36
could happen i mean we’re obviously
11:38
literally on election day
11:40
uh that’s the segue i set you up right
11:42
so you know
11:43
above all the people that figure out
11:45
what happened right now with election
11:46
day and
11:47
you know come decide i want to sell and
11:49
obviously december is not the right time
11:50
to sell but if anyone does want to sell
11:52
you know the disrupt guys we’re happy to
11:53
take a look but uh yeah you know come
11:55
january right i think we’ll
11:57
have people that start to salvage so to
12:00
speak right what they want to do and
12:01
you know people will make a decision to
12:03
move on and so you know sell and make
12:04
that exit right
12:05
so yeah i mean we’re a divided country
12:07
and there are a lot of people
12:08
i don’t know what the outcome of the
12:10
election will be and the presidency or
12:12
the senate but
12:13
they’re going to be people that are
12:15
going to see whatever happens either
12:16
direction
12:17
is i’m out and they’re going to make a
12:19
determination to sell in the next 60
12:20
days
12:21
and they’ll be people that have been on
12:23
the sidelines that say
12:25
maybe i like the results or maybe i
12:26
don’t but one things we
12:28
one thing we all agree is markets hate
12:30
uncertainty and we will have the
12:32
greatest piece of uncertainty in our
12:34
market
12:35
relieved hopefully within the next few
12:37
days i’m pretty optimistic by the time
12:39
we get to january
12:40
investors will know the rules of the
12:42
road they’re going to get excited
12:44
as they go back home and they come back
12:47
and i think there’s going to be
12:48
gigantic demand on the buy side and i do
12:50
think that there’ll be more product on
12:52
the sell side
12:53
i can’t say covid’s going away or some
12:55
of the nine-month
12:56
escrows are going away but i do think
12:58
that uh
12:59
2021 from uh investment sales standpoint
13:02
will be far more normal than 2020.
13:04
and then hopefully on top of that two
13:05
you know stimulus package gets passed
13:07
too right so kind of furthering just
13:09
helping me yeah so
13:10
you know we’ll get past the election and
13:12
to your point right half the people are
13:13
going to be pissed and that half will
13:15
probably want to sell regardless of
13:16
which half you’re on
13:17
right you know that opens up
13:19
opportunities so
13:20
yeah you you need a differing of of
13:23
opinions to make a transaction market
13:24
work
13:25
um so i i’m pretty sure we’re gonna have
13:27
some differing opinions after this
13:28
election
13:29
so same here i was literally in the
13:31
office kind of talking to someone else
13:32
on the team about just revamping our
13:34
entire acquisition pipeline which
13:36
i never showed it to you in person
13:37
barnum but it’s pretty i’d say pretty
13:39
thorough right in terms of just really
13:40
buttoned up kind of tracking everything
13:42
but
13:42
really doing a v2 of that right where it
13:44
is very much like a robot
13:46
right just everything you visualize and
13:48
kind of track so
13:49
you know in anticipation really that our
13:51
target is like hey you got to get this
13:52
done december
13:53
run a few deals through but really
13:54
january i think it’s going to hopefully
13:56
be a buying spree of some sort so
13:58
yeah let’s hope so yeah yeah and and
14:01
certainly
14:02
right regardless of what what the
14:04
outcome is going to be
14:06
uh and even if uh if there are some
14:08
distress out there
14:10
of uncertainty that lingers for another
14:13
month or two
14:14
uh reality is multi-family is still
14:18
within the commercial real estate space
14:20
still
14:21
in high demand regardless of of how the
14:24
economy is doing
14:26
right so people need to live somewhere
14:29
they may not have to go
14:30
to a retail shop they may not have to go
14:32
to an office
14:33
but they have to live somewhere right
14:35
and i think there
14:37
is a lot of equity out there that this
14:39
that recognizes that
14:42
and uh so they’ve i’ve i’ve
14:45
i expect the demand to be there too
14:48
uh the question obviously is how
14:51
the overall market will impact the
14:53
multi-family space right i think that’s
14:55
what
14:56
sometimes gets a little bit forgotten
14:58
that
14:59
if if there is a significant
15:02
downturn on the other commercial real
15:05
estate
15:06
side and cap rates increase that there
15:08
is also a pressure
15:10
on cap rates uh on on the multi-family
15:14
side
15:14
right but uh in comparison i think
15:18
multi-family will do extremely well uh
15:21
certainly in the medium term and long
15:24
term
15:24
right so uh that’s
15:27
that’s really what matters at the end
15:30
yeah yeah yeah
15:34
i agree with all of that uh so hopefully
15:38
you know the trends continue like you
15:39
said people have to have a place to
15:42
to live uh places like texas
15:45
phoenix and atlanta the true sun belt uh
15:47
major markets
15:49
i don’t think there’s any shortage of
15:51
people moving here
15:52
from the northeast and midwest if
15:54
anything i think covet is speeding that
15:56
up
15:57
uh so and we just aren’t really building
16:00
product in atlanta i mean that’s
16:02
probably one of the bigger differences
16:03
between here
16:04
and some of the other sun belt markets
16:06
uh well i would say atlanta and phoenix
16:09
is really are not building enough
16:11
texas is probably doing what they need
16:12
and probably charlotte is the only one
16:14
where they’ve
16:15
really just built an astronomical amount
16:18
but even that is
16:19
as it is i mean even places you know
16:21
where they built a lot of products like
16:22
let’s say houston
16:24
uh you know the the gap between the a
16:26
and the c space and the rents is
16:28
still pretty large so you know do the
16:31
concessions
16:31
affect that uh in houston you would know
16:34
better than i do you’re located man so
16:35
hell for those that are interested
16:37
houston’s been interested because you
16:38
don’t have institutional
16:39
so the price points of aids have come
16:40
down quite a bit and we
16:43
we were very very very very close on a
16:45
nice deal that yesterday we found out we
16:47
did not win
16:47
but uh you know we’re starting to look
16:49
at deals that we might not otherwise
16:50
like we would never look at them in
16:52
atlanta right
16:53
the cap rates are just way too tight but
16:55
in houston specifically you have
16:57
situations where
16:58
institutions on the sideline you have
16:59
guys that need to sell for a variety of
17:01
reasons right and we can get a good
17:02
haircut on kind of where they bought it
17:03
at
17:04
so yeah houston’s a little bit unique
17:06
but to your point i think that stands
17:07
for dallas right austin for sure
17:09
i mean there’s a deal in barn i don’t
17:10
know if i told you about a dylan in
17:12
austin where literally the whisper price
17:14
versus where it actually shook out was a
17:16
5 million
17:16
difference so five five million
17:20
on uh you know a 28 28 million dollar
17:23
purchase price right out of that 18 so
17:24
i mean they were 20 off right so i mean
17:26
there’s a lot of spent of demand right
17:28
in some of these markets that’s
17:29
crazy yeah no that really is i have not
17:32
heard of a story with that quite that
17:34
that big of a
17:35
a gap uh between
17:38
uh uh bid ass spread and there was a
17:42
pretty decent bid ask spread
17:44
for the summer but i would say it is
17:46
narrowed at this point uh
17:47
you know almost all the deals at least
17:49
we’re bringing to market i’m not
17:51
you know maybe maybe it sells maybe it
17:52
doesn’t but i’m not worried about the
17:54
bet i spread the way i was like that
17:55
let’s say
17:56
90 days ago so
17:59
barn you mentioned uh obviously uh
18:02
all the people moving from from the
18:04
northeast and from the west coast into
18:07
the
18:07
into the sunbelt uh locations including
18:10
atlanta
18:11
uh where do you see uh when it comes to
18:15
the local restrictions uh landlord
18:17
restrictions and
18:19
and all that how that uh is
18:22
is evolving and do you see any any
18:24
significant changes
18:26
uh going into the end of this year and
18:29
then next year in terms of
18:31
restrictions on landlords
18:34
uh so the first one restrictions of
18:36
building
18:38
the atlanta is not completely unique but
18:40
maybe a little unusual
18:42
the city of atlanta will let you build
18:44
apartments when and where you want them
18:47
city of atlanta’s about half a million
18:48
people in a six million person
18:50
msa so maybe i don’t know eight percent
18:53
of the population
18:54
most of the major counties outside of
18:57
the city limits though are very
18:58
anti-development of apartments
19:00
cobb fulton gwinnett very difficult
19:02
maybe not possible but
19:04
you’ve got certainly some headwinds to
19:06
get that built out
19:08
during the last 10 years almost all the
19:10
new product was in buckhead midtown
19:12
central perimeter right now uh
19:16
we’re going to see a little bit more in
19:17
the suburbs but really it’s the farther
19:20
out
19:20
suburbs that it seems like that’s where
19:23
we’re going to see
19:24
more product built for a combination
19:27
uh the municipality will let you build
19:30
it first of all
19:31
and there’s more and more demand in the
19:34
farther out suburbs
19:35
you know due to coven i think this was a
19:37
trend that was
19:39
atlanta like sprawls like many other
19:41
sunbelt cities
19:42
maybe the definition of sprawl really
19:45
but uh
19:46
that’s certainly a trend that is
19:47
exacerbated by covid
19:49
so places like cartersville you know
19:52
we’re going to see some product come up
19:53
there
19:53
i believe uh hall county i think you’ll
19:56
see some more product
19:58
but those like the far almost exhausts
20:00
of atlanta your core suburbs
20:02
you know you just can’t build it because
20:04
they won’t let you and as far as rental
20:06
restrictions
20:07
uh i i see no possibility of that
20:11
the way we’ve seen that and say
20:12
california or new york city
20:14
uh while we invest in atlanta yeah i
20:17
mean i don’t
20:17
see anything’s impossible but that that
20:19
is you know less than one in a thousand
20:21
chance
20:22
i would say anything meaningful
20:23
happening in the horizon
20:26
okay very good to hear
20:29
all right uh very good
20:32
ferris do you have any uh any other
20:35
burning i think that’s my god i mean
20:36
definitely barton pleasure having you on
20:38
always a
20:40
wealth of information and on top of that
20:42
the one thing i do appreciate about you
20:43
is you’re always willing to take the
20:44
time to
20:45
to share that information right i think
20:48
i appreciate you so
20:49
you know kudos to that pleasure having
20:51
you on yeah well no
20:53
pleasure having me guys this is fun this
20:55
is something i don’t do a ton of
20:56
good um you know i don’t think my game
20:59
on this is as strong as you guys so i’m
21:01
taking notes i’m learning
21:04
we don’t really want to share that too
21:05
widely come on we want to keep you as
21:06
kind of our
21:07
secret broker right so yeah so uh
21:10
talking about sharing right
21:12
so let our audience know how how they
21:15
can reach
21:16
you obviously not for the off-market
21:18
deals that’s restricted food to uh
21:20
ben and ferris but for all the other
21:23
stuff
21:26
yeah no i mean spartan brown i’m in
21:28
atlanta you can uh shoot me a
21:31
an email or uh call me at any point you
21:33
want to show your email
21:35
uh barton brown r a dot com and at
21:39
678-428-9871
21:42
okay great thank you martin thanks again
21:45
for uh joining us pardon and uh we wish
21:48
you a
21:49
good rest of the year and then a highly
21:51
successful
21:52
next year right yeah you as well and
21:55
again thanks for having me on
21:56
and uh we’ll catch up soon anton great
21:59
to meet you
21:59
uh virtually uh ferris as always great
22:02
catching up and tell ben i said hello
22:04
yeah all right thank you appreciate it
22:06
thanks guys