Tighter capital markets give cash-flush investors a competitive advantage, report A&G executives; buyer inquiries into 64-property New Jersey portfolio highlight breadth of interest in residential, commercial and raw-land assets—including among real estate newcomers.
TRENTON, N.J., July 18, 2022 /PRNewswire/ — The volatile stock market and tighter lending environment are broadening the pool of investors pursuing commercial and multifamily real estate in New Jersey and the Northeast, report real estate sales veterans at A&G Real Estate Partners.
“The S&P 500 entered a bear market just a few weeks ago, but we are already seeing a more diverse array of investors—some of whom have never focused on real estate before—flock to the relatively safe harbor that real estate represents,” said Andy Graiser, Co-President of A&G. “Yes, the capital markets are tighter, but smaller, cash-flush investors have actually been finding more opportunities in real estate over the past few weeks, not less. That’s because competitors with greater financing needs are sitting on the sidelines.”
These trends are visible among the dozens of investors now vying for a stabilized, 64-property portfolio of real estate assets being marketed by A&G in Central and Southern New Jersey, Graiser said. The sealed-bid auction closes July 27.
“Investors are steering clear of the volatile stock market and seeking stabilized, income-generating real estate assets,” he noted. “Because the cap rates are higher now, there are better returns—especially if you’re an all-cash buyer. It’s a big shift from where the market was a year ago.”
In this environment, investors are increasingly focused on income plays such as rental housing and commercial buildings, said Emilio Amendola, A&G Co-President.
That’s part of what has been driving investor interest in the 64-property New Jersey portfolio, offered by a non-distressed seller who renovated many of the buildings over the past 20 years. The portfolio includes six pools of assets each ranging from two to 29 properties, with commercial and residential development opportunities as well as single- and multifamily homes in good condition. “The portfolio is 92 percent occupied, with average, per-unit revenue of about $1,225 per month for the single- and multifamily homes,” Amendola said. “We have had investors who are new to real estate form groups to go after these income-generating assets.”
Hunt for QOZs
Qualified Opportunity Zone (QOZ) funds are also showing more intense interest in QOZ assets in New Jersey and around the Northeast. “In the case of the New Jersey portfolio, about 40 percent of the assets on offer are located in QOZs,” Amendola noted. “We are definitely seeing substantial interest in these assets from the Opportunity Zone funds.”
Those QOZ assets include income-generating properties under lease such as the 70,000-square-foot-private academy located at 1770 Mt. Ephraim Ave. in Camden. “The tenant in place will be paying $288,000 of triple-net income through August 2025,” Amendola said. “For QOZ funds and other investors, it’s a win-win.”
Raw land, safe harbor
Today’s investors are also more focused on picking up and holding raw land, Graiser said. “We’re seeing this with the New Jersey portfolio as builders, developers and investors look to vacant land as a safe harbor,” he said. “For example, our single-family site on offer at 328 Stokes Road in Medford is surrounded by houses worth up to $1 million.”
Likewise, the single-family sites that A&G is marketing in New Jersey beach towns Little Egg Harbor and Ocean Gate are solid land-bank opportunities. “As soon as the conditions for development are more favorable again, the bulldozers could get moving,” Graiser said.
Developers have also shown strong interest in the commercial land parcels available in the auction. They include a 2.27-acre, undeveloped site on Route 73 in the Marlton section of Evesham Township—a prime location between the high-traffic shopping centers Promenade Shops and Willow Ridge Plaza.
For Graiser, whose real estate career spans more than 30 years, the trends point to the opportunities that always emerge during challenging market conditions. “In New York City, we’re seeing certain spaces that were renting for $800 per square foot go for $400 per square foot,” he said. “The smart retailers are locking those spaces down with a view toward the future.”
Press Contacts for A&G: Jaffe Communications (908-789-0700), Elisa Krantz, [email protected]
SOURCE A&G Real Estate Partners