Multifamily Investment Sales Report | 2021 Year In Review & 2022 Outlook

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MULTIFAMILY INVESTMENT SALES REPORT MINNEAPOLIS - ST. PAUL 2021 YEAR IN REVIEW & 2022 OUTLOOK


INVESTMENT SERVICES TEAM

RECENT TEAM TRANSACTIONS

TED BICKEL, J.D. Senior Executive Vice President Multifamily Investment Services 952 837 3097 ted.bickel@colliers.com JEFF BUDISH Senior Executive Vice President Multifamily Investment Services 952 897 7755 jeff.budish@colliers.com

Sidal Multifamily Portfolio, Twin Cities | Built 1968-2018 | 1,114 Units | $201M

ANDY HEIEIE Senior Vice President Land & Development Investment Services 952 897 7816 andy.heieie@colliers.com RYAN SPENGLER Senior Associate Multifamily Investment Services 952 897 7786 ryan.spengler@colliers.com

Hello Apartments, Golden Valley | Built 2018 | 172 Units | $44.7M

LAUREN PANZER, CCIM Senior Real Estate Analyst Multifamily Investment Services 952 837 3018 lauren.panzer@colliers.com LACEY O'CONNOR Senior Property Marketing Strategist Multifamily Investment Services 952 374 5812 lacey.oconnor@colliers.com

Lakeside Flats, Lakeville | Built 2018 | 120 Units | $25.75M

DEBT TEAM FRITZ WALDVOGEL Vice President, Production Colliers Mortgage 612 317 2138 fritz.waldvogel@colliers.com KURT APFELBACHER Senior Vice President Colliers Securities | Colliers Mortgage 612 376 4083 kurt.apfelbacher@colliers.com

$494M

2021 TEAM SALES VOLUME

$1B

PAST 36-MONTH TEAM SALES VOLUME

Birdtown Flats, Robbinsdale | Built 2019 | 152 Units | $40.1M

Northfield Portfolio, Northfield | Built 1983-2005 | 357 Units | $30.5M


PRIMARY MARKET TRENDS

*Urban defined as Minneapolis and St. Paul proper. Average Rent $1,550 $1,500

Urban

$1,450 $1,400 $1,350

Suburban

$1,300 Jan-22

Sep-21

Nov-21

Jul-21

May-21

Jan-21

Mar-21

Nov-20

Jul-20

Sep-20

May-20

Jan-20

Mar-20

Sep-19

Nov-19

Jul-19

May-19

$1,250 Jan-19

Facing multiple headwinds relating to rent control proposals, pandemic restrictions, and social unrest, urban submarkets suffered in terms of transaction activity in 2021. General uncertainty as to how quickly rents and occupancy would recover dampened investor interest on the whole. Though each submarket within Minneapolis and St. Paul varies in terms of pace of recovery, there were bright spots moving into the final quarter of 2021, including a handful of large Class A closings towards year-end. As employees return to the office, vacancy stabilizes and more clarity forms around rent regulation, investors are becoming more bullish on urban investment moving into 2022.

MINNEAPOLIS/ST. PAUL METRO

Mar-19

Both the Twin Cities and broader Minnesota multifamily investment market rallied to a record year in terms of overall sales volume, coming in just over $3.0B. Despite a significant pullback in sales volume in Minneapolis and St. Paul proper, the suburbs and outstate markets carried the day. We see this trend continuing into 2022.

source: Yardi

Average Vacancy 10.0%

Class A trades had a banner year in the suburbs after remaining somewhat muted in previous years as core+ investors chased yield to undersupplied submarkets that demonstrated healthy lease-ups and rent growth. Well-treaded suburban markets like Edina, St. Louis Park, Maple Grove and Woodbury traded deals per usual, but the more surprising trend is the recent push to submarkets with limited to no trades during this cycle, such as Fridley, Robbinsdale, Chaska and Lakeville. 2022 will undoubtedly see newer construction trades in a number of quieter suburban markets given the amount of new deliveries well outside of the urban core. Assuming interest rate increases are modest and rent growth keeps up with inflationary pressures, strong sales volume should continue.

8.0%

Jan-22

Nov-21

Sep-21

Jul-21

May-21

Mar-21

Jan-21

Nov-20

Sep-20

Jul-20

May-20

Jan-20

Mar-20

Nov-19

Sep-19

Suburban Jul-19

0.0%

May-19

2.0%

Urban

Mar-19

4.0%

Jan-19

6.0%

source: Yardi

Total Sales Volume Urban Suburban $2.5

$2.0

Billions

Whatever momentum was lost in the urban cores last year was picked-up by the suburban and outstate markets. Value-add deals traded at historically low cap rates, falling into the high 3’s and low 4’s as a deep buyer pool continued to chase limited inventory. Opportunities remain somewhat scarce.

$1.5

$1.0

$0.5

$0.0

2012

2013

2014

2015

2016

2017

2018

Multifamily Investment Sales Report | 2021 Year In Review & 2022 Outlook | Colliers International | Minneapolis-St. Paul

2019

2020

2021

source: Real Capital Analytics


Submarket Development & Trends KEY 2017 Deliveries

2018 Deliveries

2019 Deliveries

2020 Deliveries

2021 Deliveries

Total: 4,699

Total: 7,157

Total: 4,558

Total: 7,770

Total: 9,676

NORTHWEST SUBURBAN 955 1,131 465 1,047 875 4,473 Units

MINNEAPOLIS NORTHEAST UNIVERSITY 772 1,051 478 772 97 3,170 Units

NORTH MINNEAPOLIS

NORTH CENTRAL SUBURBAN 921 346 433 341 191 2,232 Units

UNIVERSITY EAST ST. PAUL 123 550 673 Units

DOWNTOWN MINNEAPOLIS 1,262 1,147 558 1,104 337 4,408 Units

UPTOWN LAKES MINNEAPOLIS 546 649 105 633 325 2,258 Units SOUTHWEST SUBURBAN 827 892 1,165 775 1,179 4,838 Units

DOWNTOWN ST. PAUL 379 100 157 118 136 SOUTHEAST ST. PAUL 781 Units 228 116 344 Units

SUMMIT MACGROVELAND 825 325 118 175 244 1,687 Units

SOUTH MINNEAPOLIS 391 248 196 102 164 1,101 Units

NORTHEAST SUBURBAN 281 383 157 397 73 1,291 Units

SOUTHEAST SUBURBAN 1,346 220 353 732 2,651 Units

SOUTH CENTRAL SUBURBAN 820 1,278 366 961 528 3,953 Units

source: Colliers Research

Submarket Statistics Inventory Total Units

Under Construction

<5 Years Old % of Total # of Units Inventory

Rent (Average)

Rent PSF (Average)

Vacancy

# of Units

% of Total Inventory

Total Inventory

<5 Years Old

Total Inventory

<5 Years Old

Total Inventory

<5 Years Old

SUBURBAN WEST Northwest Suburban Southwest Suburban South Central Suburban Suburban West Total/Average

33,299 42,433 28,385 104,117

4,473 4,838 3,953 13,264

13% 11% 14% 13%

2,120 4,793 1,287 8,200

6% 11% 5% 8%

$1,394 $1,550 $1,409 $1,462

$1,824 $1,977 $1,724 $1,850

$1.50 $1.65 $1.53 $1.57

$1.97 $2.17 $1.93 $2.03

4% 4% 3% 4%

5% 5% 5% 5%

SUBURBAN EAST North Central Suburban Northeast Suburban Southeast Suburban Suburban East Total/Average

22,485 11,004 16,262 49,751

2,232 1,291 2,651 6,174

10% 12% 16% 12%

874 163 791 1,828

4% 1% 5% 4%

$1,264 $1,282 $1,442 $1,326

$1,737 $1,643 $1,851 $1,766

$1.44 $1.48 $1.46 $1.45

$1.90 $1.85 $1.87 $1.88

4% 3% 3% 3%

5% 3% 1% 3%

MINNEAPOLIS North Minneapolis Northeast Minneapolis Downtown Minneapolis Uptown Lakes Minneapolis South Minneapolis Minneapolis Total/Average

2,446 10,768 21,732 19,712 8,134 62,792

3,170 4,408 2,258 1,101 10,937

29% 20% 11% 14% 17%

254 31 2,690 920 429 4,324

10% 0% 12% 5% 5% 7%

$906 $1,882 $1,553 $1,647 $1,338 $1,586

$2,053 $2,065 $1,922 $1,622 $1,987

$1.09 $2.31 $2.04 $2.15 $1.57 $2.02

$2.95 $2.69 $2.64 $2.14 $2.70

8% 6% 9% 6% 4% 7%

9% 13% 6% 2% 9%

ST PAUL University East St. Paul Summit MacGroveland Downtown St. Paul Southeast St. Paul

6,865 15,040 4,066 9,453

673 1,687 781 344

10% 11% 19% 4%

669 170 171

4% 4% 2%

$1,369 $1,442 $1,573 $1,149

$1,542 $1,740 $1,641 $1,433

$1.67 $1.77 $2.00 $1.39

$2.22 $2.40 $2.01 $2.64

6% 4% 5% 4%

4% 6% 5% 1%

Multifamily Investment Sales Report | 2021 Year In Review & 2022 Outlook | Colliers International | Minneapolis-St. Paul *Includes market rate and mixed income (10-90% affordable) multifamily properties

source: Colliers Research / Yardi


Rochester Sale Volume

SPOTLIGHT: ROCHESTER, MN Rochester, home of the Mayo Clinic, received national attention after the announcement of Destination Medical Center in 2013, a concerted effort to partner public and private investment to deliver growth. While a healthy pipeline of multifamily projects came out of the ground, the investment sale market remained relatively sleepy. Not so in 2021, with $250M in sale volume, five times the historical average volume of roughly $50M. This is especially surprising given that Rochester’s total population is 115,000.

$250M

$200M

$150M

$100M

$50M

2017

2018

2019

2020

2021

source: Real Capital Analytics

10 Year Treasury Yield

SPOTLIGHT: DEBT MARKETS »

»

»

3.5

Fannie Mae and Freddie Mac had their annual loan volume caps increased from $70 billion in 2021 to $78 billion in 2022.

3.0 2.5

Credit markets have returned to pre-pandemic underwriting and there is abundant debt liquidity for multifamily housing.

2.0

After a quiet 2020, banks/bridge lenders/debt funds have grown their market share in 2021 and have been very competitive.

0.5

1.5 1.0

2017

2018

2019

2020

2021

2022

source: NASDAQ

Lumber Costs

SPOTLIGHT: INFLATION

1,750 1,500 1,250 1,000

Futures Price

Inflation is upon us with the Consumer Price Index (CPI) up ~7% and Producer Price Index (PPI) up ~10% from last year. This, alongside labor shortages and material delays has translated to increased construction costs upwards of 20-25% in most cases. Lumber costs had come down last year, but are up again over 2-3x historical norms. This is also at a time when local municipalities are tightening regulation for rental housing. Look for most, if not all newly proposed projects in 2022 to request Tax Increment Financing or similar financing sources in order to make projects feasible.

750 500

2017

2018

2019

2020

Multifamily Investment Sales Report | 2021 Year In Review & 2022 Outlook | Colliers International | Minneapolis-St. Paul

2021

2022

source: NASDAQ


Minneapolis/St. Paul Metro Multifamily Sale Activity - Top 50 Transactions YEAR BUILT

SIZE (UNITS)

Minneapolis

2020

153

Hines

Solhem Companies

$46,900,000

$306,500

The Gibson

Minneapolis

2020

159

Hines

Solhem Companies

$48,600,000

$305,700

Aug-21

Verge

Saint Louis Park

2013

192

Eaton Vance Management

Ej Plesko & Associates

$58,600,000

$305,200

Jul-21

The Laurel

Golden Valley

1979 -2004

151

Weber Properties

Oak Residential Partners

$43,750,000

$289,700

Aug-21

Rize at Opus Park

Minnetonka

2019

322

Virtus Real Estate Capital

LeCesse Development

$93,000,000

$288,800

Jan-21

The Estates at Arbor Oaks

Andover

2017

66

Peak Capital Partners

Trident Development

$18,750,000

$284,100

Aug-21

The Quinn at Plymouth

Plymouth

2002

301

The Connor Group

Mesirow Financial

$85,250,000

$283,200

Dec-21

Birdtown Flats

Robbinsdale

2019

152

Shelard Group

NAI Legacy Fund

$40,100,000

$263,800

Jun-21

Hello Apartments

Golden Valley

2017

172

Peak Capital Partners

Continental Property Group

$44,722,500

$260,000

Oct-21

Vincent Woods

Rogers

2020

168

Timberland Partners

Trident Development

$43,500,000

$258,900

May-21

Lake Jonathan Flats

Chaska

2019

117

Ridgebrook Investments LLLP

Trident Development

$30,000,000

$256,400

Oct-21

Frost English Village

Maplewood

2018

107

Axial Advisors

Sherman Associates

$27,300,000

$255,100

Dec-21

Auburn Townhomes

Hopkins

1985

136

Heartland Realty Investors

Park Avenue Of Wayzata

$34,250,000

$251,800

Dec-21

Aster Meadow

Vadnais Heights

2020

140

Peak Capital Partners

Peter Stalland

$35,000,000

$250,000

Dec-21

Cedar Green Apartments

Blaine

2021

138

Peak Capital Partners

Peter Stalland

$34,250,000

$248,200

Jan-21

Crossroads at Elm Creek

Maple Grove

2018

98

Peak Capital Partners

Trident Development

$24,240,000

$247,300

Jan-21

Tula Apartments

Minneapolis

2018

71

Classic City Apartments

Solhem Companies

$17,250,000

$243,000

Dec-21

Oak Pointe

Bloomington

1985

134

Heartland Realty Investors

Park Avenue Of Wayzata

$32,250,000

$240,700

Aug-21

Lake Ridge Apartments

Prior Lake

2019

150

Peak Capital Partners

Peter Stalland

$36,000,000

$240,000

Dec-21

The Hendrickson

Falcon Heights

2020

66

Peak Capital Partners

Kelly Brothers Investments

$15,600,000

$236,400

Jul-21

The Cielo

Fridley

2016

269

Peak Capital Partners

Trident Development

$59,000,000

$219,300

Feb-21

Louisiana Oaks

Saint Louis Park

2001

200

FPA

Sidal Realty

$43,150,000

$215,800

Oct-21

Lakeside Flats

Lakeville

2018

120

Oak Grove Properties

Guardian Financial Management

$25,750,000

$214,600

Feb-21

Hinton Heights

Cottage Grove

1995

249

Oak Residential Partners

Curtis Capital Group

$52,000,000

$208,800

Dec-21

PARKOne

Saint Louis Park

1971

186

FPA

Timberland Partners

$38,000,000

$204,300

Mar-21

Gallery Flats

Hopkins

2014

163

Weidner Apartment Homes

Sidal Realty

$33,075,000

$202,900

Aug-21

The Fitzgerald

Burnsville

1988

240

Greystar Real Estate Partners

FPA

$47,200,000

$196,700

Feb-21

Harlo

Minneapolis

2018

75

FPA

Sidal Realty

$14,300,000

$190,700

Feb-21

District 600

Minneapolis

2016

78

Bigos Management

Michael Development

$14,750,000

$189,100

Dec-21

Northpointe

Coon Rapids

1989

161

Curtis Capital Group

Shelard Group Inc

$29,900,000

$185,700

Feb-21

Inglewood Trails

Saint Louis Park

1999

124

FPA

Sidal Realty

$22,400,000

$180,600

Jan-21

Lakewood

Lino Lakes

2007

60

Peak Capital Partners

Dominium

$10,500,000

$175,000

Mar-21

Brier Creek

Minnetonka

1986

192

Ceann Company

Sidal Realty

$32,800,000

$170,800

Feb-21

Quail Ridge

Eden Prairie

1986

108

Heartland Realty Investors

Sidal Realty

$17,800,000

$164,800

Sep-21

Equinox Apartments

Saint Anthony

1971

266

DRA Advisors

Laramar Group

$43,750,000

$164,500

Jun-21

Normandale Lake Estates

Bloomington

1964

105

Berg Group

Maven Real Estate Partners

$16,500,000

$157,100

Dec-21

Parkvue Flats

Burnsville

1971

323

Bridge Investment Group

Abacus Capital Group

$49,500,000

$153,300

Sep-21

Curve Crest Villas

Stillwater

2002

90

Alliance Development

Wishrock Group

$13,500,000

$150,000

Jan-21

Larpenteur Manor

Falcon Heights

1968

144

Preferred Management Services

Sidal Realty

$20,400,000

$141,700

Sep-21

Eagle Pointe

West Saint Paul

1972

216

Monument Capital Management

Timberland Partners

$30,250,000

$140,000

DATE

PROPERTY

CITY

Dec-21

Ox-Op Gallery and Residences

Dec-21

BUYER

SELLER

Multifamily Investment Sales Report | 2021 Year In Review & 2022 Outlook | Colliers International | Minneapolis-St. Paul

SALE PRICE

PRICE PER UNIT


Minneapolis/St. Paul Metro Multifamily Sale Activity - Top 50 Transactions (cont.) YEAR BUILT

SIZE (UNITS)

2003

81

Kelly Brothers Investments

MWF Properties

$10,900,000

$134,600

Various

174

Klinkner Properties

Skally Management

$21,200,000

$121,800

Minneapolis

1970

88

EquiMax Real Estate

Michael McGuire

$10,700,000

$121,600

Phoenix Apartments

Saint Paul

1976

216

DRA Advisors

Main Street Companies

$26,100,000

$120,800

Aug-21

KMS Uptown Portfolio

Minneapolis

Various

332

North Park Ventures

KMS Management

$40,000,000

$120,500

Sep-21

KMS Management Portfolio

Various

Various

2,696

KMS Management

Centerspace

$323,800,000

$120,100

Apr-21

Ridgebrook

Brooklyn Park

1969

144

North Shore Development Partners

Ridgebrook Investments LLLP

$15,100,000

$104,900

Dec-21

Marion St. & Brittanys Apartments

Roseville

1964

277

Wall Companies

SM Engineering

$28,000,000

$101,100

Jan-21

The Birchway

New Hope

1968

108

Birches LLC

Wincrest Properties

$10,400,000

$96,300

St. Paul

Various

147

Kentaurus Capital

Pro One Management

$12,755,000

$86,800

DATE

PROPERTY

CITY

Apr-21

Sibley Cove

Maplewood

Jun-21

Live Green Portfolio

St. Paul

Jul-21

Minnehaha 94

May-21

Jan-21 Magnolia Portfolio

BUYER

SELLER

Minneapolis/St. Paul Metro Multifamily Sale Activity - Top 50 Transactions

Minneapolis St. Paul

Multifamily Investment Sales Report | 2021 Year In Review & 2022 Outlook | Colliers International | Minneapolis-St. Paul

SALE PRICE

PRICE PER UNIT


COLLIERS INVESTMENT SERVICES TEAM: TED BICKEL, J.D. Sr. Executive Vice President Multifamily Investment Services ted.bickel@colliers.com

JEFF BUDISH Sr. Executive Vice President Multifamily Investment Services jeff.budish@colliers.com

LAUREN PANZER, CCIM Sr. Real Estate Analyst Multifamily Investment Services lauren.panzer@colliers.com

LACEY O'CONNOR Sr. Property Marketing Strategist Multifamily Investment Services lacey.oconnor@colliers.com

ANDY HEIEIE Sr. Vice President Land & Development Investment Services andy.heieie@colliers.com

RYAN SPENGLER Sr. Associate Multifamily Investment Services ryan.spengler@colliers.com

COLLIERS MORTGAGE & SECURITIES TEAM: DAVID JURAN President & CEO david.juran@colliers.com

MURRAY KORNBERG Executive Vice President murray.kornberg@colliers.com

DAVID MULLEN Sr. Vice President david.mullen@colliers.com

FRANK HOGAN Sr. Vice President frank.hogan@colliers.com

KURT APFELBACHER Sr. Vice President kurt.apfelbacher@colliers.com

TROON DOWDS Vice President troon.dowds@colliers.com

FRITZ WALDVOGEL Vice President fritz.waldvogel@colliers.com

THOMAS G. O'NEIL Vice President tom.oneil@colliers.com

CRAIG THEIS Sr. Vice President craig.theis@colliers.com

colliersinvestmentservices.com Colliers International | 1600 Utica Ave S, Suite 300 | St. Louis Park, MN 55416 The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. © 2022, Colliers International.