August 24, 2018
Anyone involved with commercial real estate understands that the apartment sector has been doing extremely well for many years – especially throughout Texas. The question continues to be how long this state of affairs can last. On Aug. 23, 250 attendees at Connect Texas Multifamily were treated to spirited discussions, outlooks and opinions about the state of multifamily in the Lone Star State. The consensus? Things are pretty good, and are likely to stay that way for the near-to mid-term.
Things kicked off with “Investing in Multifamily: The Great Class Divide,” where panelists discussed the ins and outs of investing in, and managing value-add, Class B and Class C assets. A spirited discussion between lenders and owners highlighted differing viewpoints about everything from submarkets, to debt, to how much value to add to value add. When it came to the issue of investment, “the question is where, and then the question is why,” said David Harrington with Matthews. “If you look at Dallas, it’s at a sustained job growth, it’s created the second greatest number of jobs over a 10-year period. That’s the why; why companies are relocating here.”
In “The Economics of Multifamily: Understanding the Bigger Picture,” Chris Bruen with the National Multifamily Housing Council, and Jay Lybik with Marcus & Millichap, examined the big economic picture, focusing on why we aren’t oversupplied with apartment units. And while Lybik pointed out that “we are still forecasting that overall vacancy will start to rise because of supply and demand,” Texas will still be in pretty good shape.
Developer, economic development and transit agency leaders came together in “Conversation with DART and the City of Dallas about the Economic Impact of Transit-Oriented Development and Housing Policy.” The city of Dallas’ Robin Bentley and the Dallas Area Regional Transportation’s Jack Wierzenski agreed that agencies and municipalities need to take more action when it comes to helping with transit-oriented developments. This can be difficult, however. Noted Catalyst Urban Development’s Paris Rutherford: “Back in 1993, it was easier to change zoning. Now it seems that, across the board, density is a four-letter word.”
Meanwhile, when it comes to attracting and retaining tenants, panelists participating in “Looking Beyond the Amenities Arms Race: Attracting and Retaining Tenants,” pointed out the physical and service amenities that would be effective. While fitness centers and dog parks were part of the discussion mix, the speakers agreed that customer service was hugely important. “It’s not complicated,” observed Ian Mattingly with LumaCorp Inc. “Sometimes common courtesy goes a long way, but that can be forgotten in the business setting.”
Capital stacks, debt and equity were front and center during the “Chasing and Financing Deals in Multifamily Presentation.” Though interest rates were discussed, panelists indicated that they weren’t the only issue standing in the way of investment. James Eng with Old Capital Lending pointed out that his company’s borrowers are more concerned about leverage: “Some are getting cut to 70%-75% leverage, meaning they have to put in more equity, meaning returns are not as good. This means a little more hesitancy in terms of market deals.”
Rounding out the event was “Market Outlook & Development Round-Up: The Four Metros,” during which the developers agreed that building has been somewhat more difficult due to escalating land and labor costs, as well as entitlement headwinds. But when push came to shove, “I feel pretty good about the next 12-24 months, as long as there is no black swan from Washington,” said Randy Primrose with Magnolia Property Co. “I’ve been impressed with how much supply we’ve chewed through, and how we’ve remained strong.”
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Tags: Apartments & Multifamily