Connect Apartments 2017 Conference Summary

Connect Apartments brought together more than 350 attendees in Los Angeles for a full day of CRE conversations and networking. Six deep-dive panel discussions featured some of the U.S.’s top CRE leaders who shared insights into the still-hot multifamily market. The engaging discussions ranged from institutional capital players and capital deployment strategies to development, deal flow and small deals. The afternoon also featured an in-depth conversation with Freddie Mac and Fannie Mae.

Connect Media will be recapping each panel in the coming days, but here are a few key takeaways from yesterday’s conference.

Institutional Capital: Investing in Multifamily

Cushman & Wakefield’s Marc Renard notes there is significant capital available to deploy at good pricing for core plus or value add sectors. Yet, there is a psychological impediment to deploy capital as a result of being eight years into a recovery translates to being late in the cycle.

CIM’s John Bruno says the last nine months have seen debt more aggressive after seeming to take the pedal off the gas last year, which now gives him reason to pause.

CityView’s Sean Burton says investors got used to higher returns, but now he’s seeing some mismatched expectations on future returns.

 Inside the Capital Stack: Financing Today’s Deals

George Smith Partners’ Gary Tenzer says they are seeing a flood of debt coming through the door, though they are not seeing people do “stupid” deals.

Mesa West’s Brandon Bachner predicts those who stretch into secondary and tertiary markets will face more volatility in a downturn.

Wells Fargo’s Dan Borland says the bank’s investment strategy is set up for the next downturn.

CapitalSource’s Jason Baker notes there’s been remarkable discipline in the marketplace, as lenders have learned from past mistakes. The approach is more about living to fight another day.

Development: Product Demand, Cost & Drivers

Bank of the Ozarks’ Jason Choulochas cited the fact that construction cost inflation (labor and materials) now averages 1% per month versus in the past when it traditionally rose 1% on an annual basis.

AECOM’s Ted Fentin says, it is difficult to get land loans now, except for an institutional company, and he can’t imagine development continuing at the same pace it has been.

Carmel Partners’ Neils Cotter agreed that construction costs are soaring, though developers may not yet realize just how much until the lender requires a larger equity commitment to do a project.

Deal Flow and the Dealmakers

Passco’s Gary Goodman believes cycles don’t die of their own volition, and expects any change to likely occur as a result of a geo-political event.

Bascom’s Chad Sanderson says, there’s been a tremendous change in how housing is viewed, as millennials are more comfortable in a rental lifestyle that aligns better with their mobility desires and frequent job changes.

CBRE’s Laurie Lustig-Bower pointed out Los Angeles is priced to do well overall, as high occupancy rates are expected to continue given the long-term lack of development that hasn’t kept pace with demand.

 Freddie and Fannie

Fannie Mae’s Amy Bernier says, 2017 has been a “voluminous” year so far deal-wise, with the success and adoption of the green lending programs emerging as a pleasant surprise.

Freddie Mac’s Steve Griffith notes it looks like the year is shaping up to be a “record year.

 Small Deals ($1M to $20M): Financing, Investing, Building & Value-add

Greysteel’s John Mullen noted “that new high net worth investors continue to enter core markets seeking less risk while others have sought higher yields in secondary and tertiary markets.”

Matthews’ Dave Harrington says, “demand still exists.”

Greystone’s Ana Ramos says they are seeing more cash deals with refi’s planned later, as buyers who have capital bring it to the market, often buying properties ‘as is.’

Positive Investments’ Srinivas Yalamanchili notes they’ve completed 100 acquisition deals this year, but it has gotten competitive and so expensive in LA that they now look at deals in secondary markets, such as the Inland Empire.

For comments, questions or concerns, please contact Dennis Kaiser