Each year more than a million new households are formed in the U.S. And for a variety of economic and demographic reasons - the rising cost of single-family homes, higher interest rates, slower personal income growth, burgeoning immigration, empty-nesting and divorce among them - about 34% of those households choose to rent.

Moreover, the demographic groups that are most prone to seek an apartment lifestyle, including young adults, empty nesters and one-person households, are projected to grow in the coming years.

As a result, demand has been increasing while supply has failed to keep pace in many parts of the country. In the past year, about 300,000 new multi-family units were built nationwide, compared to a demand for 340,000 units. These numbers help explain why multi-family led all other property sectors in total return on investment over the past 20 years, according to the National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index, the most widely accepted national benchmark index of institutional property performance.

Inflation Protection and Other Benefits

These compelling fundamentals, however, are not the only reasons why multi-family assets are an important part of the Wien & Malkin investment program. Apartment investment provides steady and reliable cash flow; the potential of upside appreciation from property and market improvements, and growth of rental rates. There also are fewer risks - such as reliance on one major tenant or costly tenant installation requirements - with multi-family properties.

Inflation protection is another factor. In periods of rising costs, rents can be adjusted as leases roll each month to keep pace with expenses. Similarly, when properties are physically upgraded, causing them to be more desirable to the renting community, investors can realize the benefits quickly through rent adjustments, resulting in stronger cash flow.

In addition, since multi-family properties as an asset class share certain uniform characteristics, investors can benefit from cost and operational efficiencies achieved by experienced and technologically up-to-date management. Wien & Malkin investments include a geographically diverse portfolio of attractive, well-positioned apartment properties, whose management, marketing, operations and standardized reporting systems are facilitated through our state-of-the-art intranet technology. Each of our properties benefits from the full resources available at our New York and regional headquarters.

In selecting its multi-family investments, Wien & Malkin looks for "large, under-performing, high-quality properties, in established economically diversified and growing markets that are supply constrained because of tough barriers for new construction," explains Thomas P. Durels, acquisition group chair for W&M Properties.

"We like to acquire properties that have not lived up to their full potential but whose performance can be enhanced by our expert management and marketing skills," adds George S. Perry, vice president for acquisitions. "And we seek properties in communities where market fundamentals will allow us to exert upward pressure on rents. Ideally, there will be constraints on new supply, which often arise because of school, tax and environmental issues, strict zoning laws, or simply a lack of available sites.

"When we find an opportunity that meets those criteria we give it a thorough evaluation as a potential investment," Mr. Perry says. (See story entitled "Latest Multi-Family Acquisition: Quality with Excellent Prospects")

Wien & Malkin's targeted regions for multi-family investment include the Midwest, Mid-Atlantic, Northeast, Great Lakes and other selected major national metropolitan areas. Many Sunbelt areas are avoided because their economies tend to be more volatile, there are generally fewer, if any, restrictions to new supply (available sites and active construction), and the lower cost of single family housing in those regions makes home ownership more competitive with apartment rentals.

In its acquisition criteria, Wien & Malkin considers both newer properties and older developments that could benefit from upgrading and repositioning in the local marketplace. Properties must also possess superior proximity to quality schools, shopping, transportation, and entertainment.

"Apartments have been, and continue to be, very attractive on a risk-adjusted basis," says Peter L. Malkin, chairman of both Wien & Malkin LLP and W&M Properties. "The demographic trends that favor strong fundamentals for selected multi-family markets are still solidly in place. There will be favorable multi-family investment opportunities for Wien & Malkin investors in the foreseeable future which should yield steady and reliable cash returns and capital growth."