“We wish them the best, but they won't have an easy time and the odds are against them,” said Stewart, summarizing a competitor's comments in the article while he jokingly brandished the pieces of paper on which it was reprinted. “I continually refer back to this article and say, 'Well, we're still here, we're still making it.'”
Making it, indeed.
ACRE, an acronym for apartments and commercial real estate, is flourishing.
The company, headed by Stewart and his partners, Bill Anderson and Chris Robinson – all of whom are senior apartment broker alumni of national commercial real estate giant Marcus & Millichap – are exceeding almost everyone's expectations other than their own.
“We decided there was more strength in synergy, working together,” said Stewart of ACRE's culture of sharing information rather than safeguarding it and cooperation rather than isolation. “That wasn't encouraged in the other organization.”
By early June 2013, ACRE's synergistic approach had racked up eight sell-side transactions totaling just shy of $10 million, as well as four buy-side transactions totaling more than $6.8 million.
In terms of sheer volume, the sell-side transactions put ACRE in a first-place tie with two other firms; the buy-side transactions tie ACRE for third place with another firm.
ACRE firm deals primarily in 12- to 100-unit apartment developments.
“This year, it's definitely a big change over last year. Right now, the demand for apartment buildings is at an all-time high. Not only are the lenders coming back, but the interest rates dropped below four percent for apartment loans this year,” Stewart explained. “But it's also a flight to a safe investment.”
Stewart said that the popularity of apartments as an investment option stems, in part, from uncertainty surrounding the stock market and the economy in general.
Additionally, he said, occupancy rates were boosted by the last downturn in the housing market, when many people lost their homes and became renters.
Sales of apartment buildings as investment properties have done very well in the last few years and “in San Diego, much more so than in the rest of the country,” said Stewart, who flipped his first house as a 21-year-old and banked $20,000 in the process, even before earning his bachelor's and master's degrees from Cal Poly Pomona. “That, coupled with the fact that there's a lack of inventory because people that own apartments are hesitant to sell now and it's driving prices up. And right now, we've got a ton of buyers, but we just don't have that much inventory to sell.”
Stewart estimated that about 75 to 80 percent of ACRE's buyers are in San Diego.
“Based on historical sales, and we usually go back six months, I sat down with (the seller) and I said 'your property is probably going to be worth $4.2 million,'" Stewart said. "Then, within the span of thirty days, we went to market at $4.4 million, and ended up going into escrow at $4.45 million and we had multiple offers. So, that's kind of where we are in the market.”
However, several factors that are difficult to forecast could influence the market for better or worse in the foreseeable future, Stewart said.
Among these are interest rates, the economy in general, and the possible bifurcation of Prop 13 by the California State Legislature, which would result in property tax increases for owners of apartment buildings.
But whatever the future holds, odds are good that ACRE will continue to prosper and that Craig Stewart will still be saying, “We're still here. We're still making it.”
Lovitt is a freelance writer based in La Jolla.