Berkadia has hired a pair of industry veterans from JLL to expand Berkadia's apartment sales team in Phoenix, a market where multifamily sales activity has dropped dramatically.
The joint venture between Warren Buffett's Berkshire Hathaway and Jefferies Financial Group said it added John Cunningham and Charlie Steele as senior managing directors. Cunningham and Steele move to Berkadia after spending more than 11 years at JLL.
In their new roles at Berkadia, Cunningham and Steele will leverage their relationships with large and established apartment developers and investors in the U.S., while continuing to focus on the sale of institutional-quality properties in Phoenix and Las Vegas, Berkadia said.
Berkadia is expanding into continuing headwinds in the apartment sales market. Higher interest rates and tighter capital markets have led to Phoenix multifamily investment sales activity "slowing considerably since the Federal Reserve began hiking rates," according to a CoStar market report.
About $3.5 billion worth of multifamily properties traded over the past 12 months, "a 75% decline from the record levels seen in 2022 and 2021," CoStar market analyst Connor Devereux said in the report. "Additionally, the higher cost of debt, coupled with weaker rent growth and occupancy projections, has put upward pressure on yields."
Also, the average capitalization rate of apartment sales "is up 200 basis points since bottoming out in early 2022, and property values have weakened," according to the report. When capitalization rates rise, investors typically expect to pay lower prices to help mitigate the increased risk and achieve predicted yields.
Significant Suburban Sales
Apartment sales in the Phoenix suburbs, however, have shown signs of life as several deals valued at $90 million or more closed this year. In January, Washington's Weidner Property Management paid KB Development $112 million for the 328-unit Skywater at Town Lake in Tempe, Arizona, according to CoStar data
Phoenix's multifamily market should see "another year of tepid rent growth" in 2024 but could start to rebound next year as rent growth speeds up again, CoStar said. "The stronger-than-expected macroeconomy and recent pullback in construction starts, however, set the stage for a potential reacceleration by late 2025 or 2026," the report said.
As managing directors at JLL, Cunningham and Steele directed multifamily investment sales and equity procurements for apartment developers and owners across Arizona, Nevada, and New Mexico. During his 18 years in commercial real estate, Steele has completed more than $7 billion in real estate transactions.
Cunningham and Steele will report to Mike Miner, a senior vice president and co-head of investment sales and production operations, Berkadia said. The addition of Cunningham and Steele, who combined have more than 50 years of experience in the industry, will help Berkadia grow its investment sales business in the region, Miner said. “I look forward to watching them expand our capabilities in the Class A space" in the Southwest, he said in a statement.
The duo of Cunningham and Steele will work closely with senior managing directors Mark Forrester and Ric Holway, managing director Dan Cheyne, and director Andrew Curtis in Phoenix and director Jared Glover in Las Vegas, Berkadia said.