Multifamily 'Goose Is Golden' Industry Leaders Say

Thu, 2012-04-05

Apartment Finance Today kicked off its annual conference Tuesday in Las Vegas with a spirited panel comprising various industry leaders and the magazine’s advisory board members. The group touched on a number of topics, ranging from slow markets to student and senior housing to an overview of the state of the industry. And overall, the majority of them remain positive about the upcoming economic cycle.

“The goose is golden in many respects,” said Guy Johnson, president and CEO of Irvine, Calif.–based Johnson Capital.Johnson explained that healthy rent increases and a recent opportunity to reinvest reserves and returns in existing products to improve resident services were examples of positive changes he is seeing across the industry. “Now is the time—take a look and see what you can do.”

Other panelists, including National Multi Housing Council president Doug Bibby, echoed that sentiment. Here are some of the other highlights from the session:

Dave Woodward, founder of Denver-based CompassRock Real Estate, and Trip Stephens, chief investment officer of Orlando, Fla.based developer ZOM Cos., explained how the current economic cycle differs from previous cycles. The two were optimistically cautious about going full-speed ahead with the still-recovering economy. “The arrows are pointing in the right direction,” Woodward said. “Most markets are very healthy, there’s a lot of talk of development, demand metrics are good, and employment is improving. In my personal opinion, single-family housing is not going to have a huge impact.”Stephens, also, was positive. “We’re eternally optimistic,” he said. “We’ve got great dynamics, and the next few years really need to see job growth, because that’s ultimately where housing demand is born.”

Brent Little, president of Dallas-based Fountain Residential Partners, touched on the continuing demand for student housing. “Student housing is one of the darlings of the industry right now,” he said. “We’re building typically eight and a half to 9 percent on cost, which is very attractive to capital.”

Mel Gamzon, president of Fort Lauderdale, Fla.based Senior Housing Investment Advisors, explained what is happening at the other end of the rental market spectrum, with senior housing. “Capital has found the senior housing industry and likes that it’s a defensive real estate strategy and substantially need-generated,” he said. “Industry-wide, occupancies are at 89.6 percent, and supply and demand are out of equilibrium in most markets, so there’s a huge need for new construction.”

Bibby touched on the trending issue of the REO-to-rental program. “There’s a tremendous amount of interest in this,” he said. “But when they start peeling this onion, they are going to have to hold these proposals for maybe 10 years, and some are in undesirable markets and need to be managed. There’s a lot of capital that wants to use CMBS, looking at this program and wanting to make it work.”

Woodward explained the state of many of the assets his company is acquiring. “Our company does a lot of management for national lenders for multifamily and commercial,” he said. “They’ve been largely neglected—maybe their sponsor ran out of capital before they ultimately baled and we get the chore of cleaning them up. Early on in the cycle, deals were the worst of the worst, but as the economy started adjusting, deals that were actually able to hang in there are much better quality as a result.”

Click here to view the original article by Jane M Wolkowicz for MultifamilyExecutive.com.



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