Given current market conditions, many multifamily investors are targeting value-add deals, where return opportunities are strong. During the 2017 NMHC Apartment Strategies Conference, multifamily executives shared insights into where value-add makes sense and what challenges there could be moving forward.
Daryl Carter, chairman and CEO of Avanath Capital Management, kicked off the discussion with some debate about where the best value-add deals are to be had. He said he seeing some of the strongest growth in cities where it has become comparatively cheaper to create jobs, noting Sacramento, Orlando and Ann Arbor, Mich., as strong job growth markets.
Russel Minnick, president and managing director of Bridge Investment Group Partners, said his company would largely be sticking with the markets they already have a presence in, some 23 cities across the country, but also focusing on high employment growth markets.
While there are opportunities in the market, there are challenges. For example, Avanath’s Carter explained that much of his staff, given their relative youth, have never worked in an environment where there are double digit interest rates and that will pose a challenge not just for his organization, but the entire industry.
Shifting economic policies and performance could also prove problematic. Bob Hart, president and CEO of TruAmerica Multifamily, half-jokingly noted that he worried about President Trump’s willingness to engage freely on social media platforms and the consequences for the business community and wider economy that may arise-especially given the risk of entering into an inflationary period.
The session concluded as Keith Harris, SVP and director of capital markets for The Bozzuto Group, asked the panelists if there were events or situations that did not arise in 2016 which they would have thought likely. Carter pointed to affordability issues affecting the whole industry while Minnick noted the surge in labor and supply costs.