News
MULTIFAMILY SUMMIT, PART II
March 15, 2012
| It's a Goldilocks moment for multifamily landlords. Supply and demand are just right. But weren't there some angry bears in that story? | ||
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| At Bisnow's Third Annual Chicago Multifamily Summit on Tuesday, two knowledgeable panels discussed the market's current Goldilocks-like condition and how long that might last to an audience of over 600 CRE pros at the River North Westin. (Perhaps we could bribe those bears with the mints we handed out at the event.) | ||
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| George Klenovich (right), managing principal of the Chicago office of the Reznick Group, moderated his four-person panel with aplomb (we stumbled upon a dictionary in the attic), just as he did at last September's Chicago Real Estate Summit. He tossed out questions on multifamily finance, the recovery of for-sale residential market as a factor in the health of rental property, and the possibility of overbuilding. | ||
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| Rent growth is bound to moderate as demand slacks off a bit, says Pearlmark Real Estate Partners managing director Ed Ryder. He's overseen the acquisition of about 9,000 multifamily units and says there's already an uptick in apartment tenants leaving to buy houses, even in certain markets considered basket cases only a few years ago—Phoenix, for example. On the supply side, no market has gotten ahead of itself yet with multifamily overbuilding, except maybe DC. More importantly, no market will get ahead of itself, Edward asserted, because lenders will put a stop to it. (There must be something about DC that makes even the money men a little crazy.) | ||
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| The yin and yang of real estate finance is fear and greed, and in multifamily, fear has been receding while greed is advancing. Walker & Dunlop VP and FHA finance whiz Carolyn McMullen says some lingering fear remains from the Panic of 2008, but she's not getting calls anymore from multifamily owners who need to refi right now because their lenders are dumping them in terror. Looking ahead, she suspects that change to Fannie and Freddie is going to be a long time coming, because the major parties would rather spend their political capital doing other things. | ||
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| HFF executive managing director Matthew Lawton points out that the GSEs' multifamily divisions are very profitable, so it's unlikely that they will be leaving the space any time soon. On the other hand, the GSE role in single-family housing will be restructured eventually. As for multifamily fundamentals, Matthew thinks that there's still pent-up demand for urban rental properties, largely because boomerang children want out, and their parents want them out too. (Who knew parents had lives outside of their kids?) Class-A properties have had their turn, and so a lot of the lift in value this year will be in Class-B value-add properties . In Chicago, he expects occupancies to hover in the mid-90s and rents to achieve 5% to 7% growth this year. | ||
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| The intense interest among investors in Class-A properties means a shortage in multifamily core opportunities, but there are still enough value-add properties to make the hunt for acquisitions satisfyingly profitable, according to Cornerstone Real Estate Advisers managing director Steven Wallace. If you already own multifamily property in a strong market like Chicago, you'll have a good year in '12, he says, since there's nothing for now that will stop the market's upward momentum. (To misquote Sinatra: It was a very good year for city firms with multifamily portfolios.) There's still migration into the city, and he expects more employers to come back, too. New construction might make some people nervous, but not Steven: The new supply in Chicago this year will add only a manageable amount of current stock, he said. | ||
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| Bisnow is always happy, between panels, to have a word from one of our sponsors. Or in this case, a lot of words (and data) in the palm of one's hand. RealView LLC's Lucas Schwaller explains how the RealView Mobile Inspection program allows property inspectors to create and update reports in the field, using a tablet computer (one of which Lucas is wielding here for dramatic effect). Rather than just waiting around for an opportunity to download, the information is immediately published to the secure RealView site, which can be accessed 24/7 by authorized users. Not only that, the stored information can be more than just the result of pecking on a keyboard, but can include hand-drawn sketches, floor plans, video images, or even photographs taken with the tablet camera. |
