One month earlier, MIG Residential Real Estate Investment Trust made its first acquisition, a 186-unit apartment complex in Atlanta. The purchase price wasn't disclosed.

In January, McCaslin Development secured a $16.1 million construction loan from Guaranty Federal Bank to build Riverhill Apartments in Grand Prairie, Texas.

And who says multifamily has lost its shine? Actually, the asset class is in a transition period. Still liked by investors and lenders, the field is awash in capital. Unfortunately, despite all the potential financing the good deals may be a thing of the past and all that capital may be a hindrance as some lenders start to pull back due to a congested playing field and as yields continue to pitch downward.

"While some lenders are busy, the competition is such that a lot of capital is chasing really too few deals at this point in time," observes Bronwyn Morgan, director of multifamily housing for the Mortgage Bankers Association in Washington, D.C.

According to Scott P. Ledbetter, president of Memphis-based SPL Corp. and chairman and CEO of LEDIC Management Group: "There will continue to be too much capital chasing too few deals as long as multifamily real estate remains in favor. This will change ž and the change in inevitable ž when the balance of supply and demand shifts and forces downward pressure on occupancies and then on rents. Most financial institutions will remain alert to future signs of change, but history has shown that obvious trends escape just enough of the developers and lenders to cause a major down cycle due to overbuilding.

"A new potential threat to stability in this development cycle is the introduction of apartment REITs into the supply vs. demand equation. For example, with rising interest rates, falling cap rates and a diminishing supply of Class-A quality properties for sale, REITs have turned their attention to development to meet yield requirements." SPL Corp. is an investment brokerage and market research firm specializing in apartments. LEDIC Management Group is the property management affiliate of SPL Corp. and manages over 20,000 multifamily units in the Southeast, including Memphis and Nashville, Tenn., Atlanta, Charleston, S.C., and Jackson, Miss.

"It's a borrower's market," says Dave Henry, vice president of America's Origination at GE Capital Commercial Real Estate in Stamford, Conn. "We are seeing increased competition from all sources. As a result, underwriting standards have started to relax, which we hate to see."

The company recognizes the difficulty in meeting standards in the crowded marketplace but expects to increase its total business slightly in 1995 and increase the amount of multifamily. "We would like to target 45% of our loan portfolio to be multifamily," Henry says. "If anything we are more aggressive with multifamily."

On the other hand, Berkshire Investment Advisors, a Boston-based institutional money manager, will be less aggressive with regard to multifamily, especially with pension plans.

"Basically, we decided to focus our business on looking for private money sources and staying away from the pension area, which we had originally envisioned as the way to go," says Ross Keeler, president.

Spreads that are being offered in the marketplace have changed considerably from just a year ago. "The spreads have narrowed tremendously as a great deal of capital has come into the market," Keeler says.

"Everybody is back," exclaims Shekar Narasimhan, president of Washington Mortgage Co. based in Vienna, Va. "All the lenders that left the business are back. Insurance companies, savings and loans, pension funds, Fannie Mae and Freddie Mac are all back."

The result of all this, Narasimhan says, is that spreads have continued to tighten even though interest rates have dropped.

Reportedly, apartment loans now are being underwritten at 120 debt cover again. The 120 debt cover is the amount that the net operating income has to cover the debt service payment. The standard in the industry for the past 31_2 years has been 125, which means there is a reduction in what the market perceives as necessary to make a conservative, investment-grade loan.

Gaye Beasley, president of Bethesda, Md.-based Patrician Mortgage, observes the same disquieting trends as Narasimhan. "Last year was extraordinarily competitive. This year the competition for standard apartment properties will be pretty fierce."

Beasley says she believes the competitive marketplace will hurt a lot of mortgage companies, especially those that don't have access to a conduit or a program like Freddie Mac.

Jeffrey A. Davis, president of Chicago-based Cambridge Realty Capital Ltd., says he thinks the competition will continue for awhile, but not with the same fervor. He says that a lot of investors and lenders had not diversified their product types, but that now they are starting to do so. Cambridge Realty Capital Ltd. and its two affiliated companies, Cambridge Realty Capital of Illinois and Stanford Properties Ltd., combine to form an integrated real estate organization.

Neil Cullen, executive vice president with AMI Capital Inc., based in Bethesda, Md., agrees with Beasley. "There are more sources of capital in the marketplace. Fannie Mae, Freddie Mac, insurance companies, big banks, some thrifts and credit companies are all heavily interested in financing apartments."

Cullen says that his company will be smarter and compete more effectively to combat the competition in the marketplace, which he predicts will last through 1995 and the foreseeable future. "We have new programs for financing tax-exempt and low income housing tax credit (LIHC) properties, mobile home parks, whole loan purchases and senior housing. We will also put more emphasis on FHA financing and our securitized sources," he says.

The Reston, Va.-based Federal Home Loan Mortgage Corp. (Freddie Mac) came back into the multifamily mortgage business on a full-time basis last year. Mitchell Kiffe, director of multifamily underwriting, notes, "We bought about a billion dollars of multifamily mortgages in 1994 and we expect to target $1.5 billion in 1995."

Kiffe says Freddie Mac's main focus is its conventional cash program for the refinancing of acquisitions or the moderate rehabilitation of quality apartment communities.

At the Federal National Mortgage Association in Washington, D.C., about $5 billion worth of business was done on the equity side of the multifamily asset class.

This year the company is aiming for $6 billion. "It is not going to be easy, given the slowness of the general market in the first quarter," says Thomas White, a senior vice president at Fannie Mae, "but we have an awful lot of major swap transactions in process and a lot of people are talking to us right now about different products."

According to a recent report from Marcus & Millichap, as the second quarter of 1995 unfolds, there are some significant trends and factors investors should note:

 Pension funds have replaced REITs as the most aggressive institutional purchaser of investment real estate.

 Lender foreclosure activity for the last 12 months is less than the previous 12 month period.

 The increase in interest rates has moderated the increase in prices of investment real estate.

 Private investors are coming off the sidelines, particularly in Southern California.

 Lender properties are attracting an increasing amount of investor interest.

 The gap between buyer and seller expectations has widened since rents and values have increased.

 1995 will be a good year to buy quality properties in stable to improving areas, and to sell properties in marginal or declining areas.

According to the report, the nation's investment real estate reflects a positive outlook and sets the stage for a promising second quarter. by Steve Bergsman