August 25, 2017
A statewide perspective on Texas multifamily was what approximately 200 attendees expected from the Connect Texas Multifamily conference on Aug. 24 at the W Hotel. The conference provided plenty of information and opinion to a packed audience. The good news for those who attended is they came away with the information – plus a great deal of insight and a dollop of advice, as well.
The conference launched with the Texas Apartment Association’s legislative update. TAA’s Vice President of Public Affairs David Mintz caught attendees up on what took place during the most recent session in Austin. Some of the issues the TAA spearheaded included class action lawsuits against landlords concerning utility bills, late rental fees, linkage fees and property taxes. Property taxes are a hot-button issue, Mintz noted. “We supported legislation that focused on taxpayer rights, and supported efforts to lower the rollback for taxing entities,” he said. “Unfortunately, the house and senate could not come to an agreement. It remains at the top of our agenda as we look toward 2019.”
“Multifamily Investment: Gauging the Climate,” saw panelists discussing topics ranging from strong multifamily fundamentals, to more supply, to concessions, to strategies moving forward. Though the apartment sector is strong, the panelists expressed some concern. “I like Houston, and Dallas is doing great,” said Gary Goodman, Passco Cos.’ Senior Vice President, Acquisitions. “But I wonder if there is enough job growth to absorb all the units. There could be some softness coming up that could be troublesome for us.”
Meanwhile, the focus fell on outlier markets in “Around the Edges: Tertiary Markets.” The speakers agreed that investors looking for yield might find it among multifamily properties in areas such as Tyler and Longview in East Texas, and Corpus Christi in South Texas. “When you look at the secondary and tertiary markets, you can find better risk-adjusted returns and cap rates, and can get well into double-digit cash-on-cash in year one,” said Matt Wideman, Transaction Manager with ARA Newmark. “Secondary markets will have more focus on yield.”
Then there was “Boom or Bust: Development, Design and Construction,” which focused on whether there is overbuilding (there isn’t), demand (of which there is plenty) and amenities (which keep changing). Panelists also discussed challenges when it comes to building new apartment properties. “It’s definitely harder now,” commented Seneca Investments President and CEO Matthew Stone. “We haven’t started a new multifamily project in Dallas-Fort Worth in about two years. It’s harder to make things pencil.”
Laila Assanie, Senior Business Economist with the Federal Reserve Bank of Dallas, then provided information about what’s been going on in Texas, especially when it came to the oil price downturn and job creation. The current situation is somewhat more optimistic than it was in 2015-2016, she said, and her forecast is for generally higher growth in Texas, versus the U.S. economy. However, “headwinds could be a sharp decline in oil prices, or a stronger dollar and fewer exports,” Assanie cautioned.
The final session of the day, “Texas Lender Roundup,” showed a general consensus that there is plenty of capital for the right deals from the life companies, banks and government agencies. Capital is especially strong for projects that are green and affordable. Small-balance loans are also plentiful. Said Hunt Mortgage Group’s Senior Managing Director, CRE Vic Clark: “$1 million to $20 million, green and affordable, that’s where the money is. If you’re a developer or buyer, and shifted to where you’re buying B and C deals with an affordability and green component, there is no possibility of saturating the market with that product.”
For comments, questions or concerns, please contact Amy Sorter