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There’s Something for Everyone in Multifamily

By February 4, 2015No Comments

Enough variety exists in multifamilyinvestment to satisfy foreign investors, value-add seekers and those looking for long-term yield, Passco Cos.’ SVP acquisitions Gary Goodman tells exclusively. We spoke with Goodman in the wake of NMHC’s Apartment Strategies Outlook Conference in Palm Springs last month to get his take on what investors are seeking, the foreign-investor outlook on this market and anticipated changes for the coming year. What are investors looking for in multifamily properties?

Goodman: There’s such broad interest in multifamily right now because of the environment. There’s something for everyone. There are a number of investors who will only work for value-add because of better long-term yield, and there are those of us who want better quality long term. Others seek secondary and tertiary markets for higher yield, and there are those who stay in gateway cities because the performance may be better. You can hardly imagine doing wrong with any of these strategies because there’s such a tailwind in the industry. Are foreign investors focused on different types of properties?

Goodman: We are advising a number of foreign investors. One family-office group out of Asia is investing in value-add, older properties we’re rehabbing and in new properties we are sourcing. They look at the market and are trying to cover the spectrum. They see opportunities in all areas. A lot of foreign investors are just interested in placing their money in the US and are looking at all the alternatives in multifamily.

It always starts off with trophy properties for those unfamiliar with the landscape, and then they form alliances with local developers or sponsors. As the market starts to mature, they begin to realize, “Maybe I should listen to the sponsor who says I can get a higher yield in this market or with value-add strategies.” Which markets are foreign investors currently eyeing for multifamily?

Goodman: Foreign investors typically like the major gateway cities. Some only want to invest in New York, San Francisco, L.A. and Miami. But an Italian advisor we know is putting together a new fund looking at secondary and tertiary markets because he’s learned the yield is better there. They have a difficult time competing with investors who want to be in these major markets. There’s less competition and better yield in these other markets. What changes do you anticipate for this sector in the coming year?

Goodman: I don’t know that there will be as much of a change as a continuing trend. It’s hard to imagine anything is going to derail this frothy environment for multifamily. There’s so much working in favor of it. There’s a disciplined supply pipeline and a huge demand of Millennials in the renter pool, plus the Baby-Boomer population has become a part of it. They were dismissed in the last several years for multifamily, but the overall trend is so strong, and people have to live somewhere. Many residents including Baby-Boomers and Millennials are getting priced out of the urban cores because rents have gotten so high and apartments are so small. What we’re starting to see is a lot of them moving out into the exurbs, where there are movie theaters and their favorite chain restaurant and they can walk to work. It’s a lot bigger apartment for the money.

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