September 21, 2016
By Amy Wolff Sorter
Available capital for multifamily, along with some concerns about overbuilding, led the discussion at Connect Apartments’ “Inside Today’s Capital Stack.” Throughout the session, which took place Sept. 15 at the J.W. Marriott Downtown Los Angeles, financial experts shared their insights and concerns, with one of the latter focusing on lack of affordable housing.
“In all markets, there is a screaming need for housing for those who have regular jobs,” said Al Brooks, with JP Morgan Chase. Brooks added that, while the multifamily coming out of the ground now are great for those who have higher-paying jobs, “the vast majority of Americans don’t have those jobs.”
Further adding to the issue is that value-add plays are taking out what could be quality Class B and Class B-Minus housing. “This type of housing, especially in secondary markets, we really don’t need those high amenity levels or finishing,” observed Tom Booher, with PNC Real Estate.
The panelists agreed that lending was becoming more structured, with lenders “backing off on cost levels for new construction; they’re looking carefully at value add,” noted Marcus & Millichap Capital’s Bill Hughes. “In the development stack, banks are full up on construction,” added Michael Fleischer with Related Fund Management. “They started lending aggressively a couple of years ago, and are pulling back.”
Overall, the speakers indicated that multifamily is still doing well, thanks to the strong fundamental drivers of jobs and population. However, “there is still great opportunity,” Fleischer said. “Hopefully people can find projects that are more economically viable.”
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