February 10, 2020
In August, 2019, Ten-X Commercial ranked Houston as the nation’s top “buy” market for multifamily real estate. Six months later, JLL’s Aimee Morgan, who moderated Connect Houston’s “Multifamily” panel, asked how those projections held up. The five experts participating in the session felt, for the most part, that the actual performance didn’t live up to what Ten-X said.
“Houston is a great market,” commented Swanipal Agarwal of Nitya Capital and Property Management. “But Houston has lagged behind Dallas and Austin . . . (with rent growth) flat to a small increase.” Kelly Blaskowsky, with Roscoe Property Management, agreed, noting that, while “units are being absorbed at a faster pace,” the market-rent growth isn’t going to hit the 16% rent-growth increase Ten-X forecast.
Parkview Financial’s Doug Esteves provided a somewhat different perspective, however, pointing out that many of “the things we’re seeing in Arizona are going on in Houston,” such as too-high rents and potential overbuilding. “But here we are in Arizona, doing very well,” he said. “We’re still bullish on the Houston and Texas markets, though cautious with core properties, as competition for capital is high.”
The session was one of three taking place at Connect Media’s Connect Houston event on Feb. 4 at the Westin Galleria. In addition to putting a realistic spin on Ten-X’s projections, the panelists discussed development, staffing challenges, amenities, concessions and employment. And, when it came to the question as to whether there were too many unit deliveries in Houston and resulting concessions, both Kelly Blaskowsky of Roscoe Property Management and Camden Property Trust’s Roman Stephens noted that overbuilding isn’t a problem as long as employment growth supports it. However, “I’ve seen pockets of what I call concession aggression,” Stephens said. “It hurts my head to see a brand-new, $500,000-per-unit build, giving away 4.5%-5% in concessions. I’d love to know the capital source of that, as it makes it difficult to pencil in over the longer term.” Added Blaskowsky: “When you start playing with concessions, it confuses (renters). Its better off to give them what the actual price is.”
Meanwhile, Hunt Real Estate Capital’s John Sloot discussed Fannie Mae and Freddie Mac lending, pointing out that 35% of GSE’s capital is dedicated to mission-driven workforce housing. “That’s our focus,” Sloot remarked. “We’re looking at the workforce-housing, mission-driven opportunities.” Furthermore, when it came to discussing attractive deals for financing, Sloot indicated that sponsor and location are good indicators, but sponsor experience isn’t always a necessity. Both Fannie and Freddie are open to lending to sponsors with less experience, but those sponsors should have strong management and boots on the ground, Sloot commented.
Overall, the panelists determined that, even with some of the issues Houston faces, the scenario for multifamily will continue strong. Doug indicated that the California exodus moved to Arizona, and is now making its way to Texas, and Houston. “Unemployment is down, rents are up, immigration is huge,” he noted. “Companies are moving here, and we want to be here to take advantage of it.”
Pictured (l-r): John Sloot (Hunt Real Estate Capital), Roman Stephens (Camden Property Trust), Aimee Morgan (JLL), Kelly Blaskowsky (Roscoe Property Management), Doug Esteves (Parkview Financial), Swanipal Agarwal (Nitya Capital and Property Management)
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