Content Partner

Brickhouse Walker Dunlop Multifamily Washington D.C.

Spotlight on D.C.: Apartment Assets Resist Economic Turbulence

by Sarah Daniels January 28, 2021

The Washington, D.C. metropolitan area has been a perennial favorite for multifamily capital, particularly pension funds, life companies, family offices and other institutional investors and is often regarded as “recession-proof.” However, as we all know, 2020 was a year like no other. What impacts have COVID-19 and recent economic turmoil had on this market’s luster, and what do the prospects look like for investors, owners and operators in the long term? An Economy Buffered by Government and Technology The D.C. Metro’s response to the crisis has been one of the most robust, with local the economy currently 90 percent + open for business and no signs of a dip back into lockdown. From the initial shutdowns in March 2020 to the continued uncertainty of today, cities with heavy representation in retail, tourism and service sectors have experienced significant economic repercussions from COVID-19. In Washington, D.C., by contrast, having the federal government as the city’s largest employer has served as a major buffer. D.C. experienced a particularly acute government-mandated economic shutdown from March to May. While payroll performance in the District of Columbia’s leisure and hospitality sector declined nearly 60 percent from May 2019 to May 2020, jobs in this sector …

January 28, 2021

Content Partner Features Multifamily Walker & Dunlop

Multifamily Market Offers Resilience in the Face of Economic Pressures

by Sarah Daniels January 14, 2021

A Tale of Two Cities “It was the best of times, it was the worst of times…” More than 150 years later, the iconic Dickens quote still strikes a chord. While every recession is different, the pandemic-induced shelter-in-place rules quickly sent the U.S. economy into the deepest recession on record in the second quarter. Fortunately, economic recovery, at least thus far, is proving to be just as swift — in certain areas. While unemployment rates dropped quickly from 14.7 percent in April to 6.7 percent in December, a more detailed look shows widening inequality that has yet to be resolved. For those with a bachelor’s degree or higher, unemployment peaked at only 8.4 percent in April and has since fallen to 3.8 percent — a rate that was once thought to be near the point of equilibrium for the economy. Unemployment rates for those with less than a high school education peaked at 21.2 percent and for those with a high school education, at 17.7 percent. To add to the current volatile environment, the contentious U.S. presidential election kept investors on edge, assessing political as well as economic uncertainty, at least in the near-term. Volatility indices remain somewhat elevated, although …

January 14, 2021

Content Partner Features Lee & Associates Western Feature Archive

From Expanding Operations to Leveraging Technology, Lee & Associates Evolves in the Face of Change

by Sarah Daniels January 11, 2021

The situation is a familiar one from the past year: 2020 changed a banner year full of promise into a difficult scenario full of fear and challenges. Jeffrey Rinkov, CEO and chairman of the board at Lee & Associates reflects on how his company took an emphasis on technology and communications infrastructure and used the past year as a time for reflection and a period to promote growth and client engagement. He also discussed trends he’s seeing for the future, the lessons he’s learned from a most unusual year and why he’s feeling optimistic for 2021. Focusing on Clients from the Start It’s hard to believe that less than one year ago, Rinkov’s team was experiencing an industry-wide high of momentum with massive pipelines and robust capital. What happened when the unthinkable came to pass? Rinkov explains that the executive leadership team at Lee & Associates took a moment in the early chaos to pause and evaluate what was critical, “Employee and agent safety, client connectivity and how we could deploy resources throughout our platform in a completely different way to support our agents and their client pursuits and interactions.” Tech savvy, hours of leadership phone calls and ingrained communication …

January 11, 2021

Content Partner Features Industrial Lee & Associates Loans Office

Capital Markets Face Slowdown and Lender Scarcity

by Sarah Daniels December 8, 2020

The ability to find debt and equity financing for acquisitions and new development has been deeply affected by the coronavirus. Heading into 2020, there was plenty of inexpensive capital available to real estate investors and developers. The once wide field of potential lenders has shrunk significantly over the past nine months. And as for equity availability, it will be important in the coming months to be patient and diligent. REBusinessOnline recently spoke with Gary Sopko, senior vice president – structured finance/investment sales of Lee & Associates and principal at Baden Advisors (an affiliate of Lee & Associates) via video conference about his company’s approach to investment sales, debt financing and equity placement for commercial real estate clients in the midst of an unprecedented year. Sopko interprets what the lower loan volume across the board means for the commercial real estate industry, trends he’s seeing and his role in educating borrowers/clients on how to navigate this challenging time. Changing Lender Pools At the start of the pandemic, a variety of lenders were still ready, willing and able to lend; however, as the pandemic continued and shutdowns spread, the lender pool shrunk. Many private debt funds had to suspend lending for a …

December 8, 2020

Content Partner Features Loans Walker & Dunlop

The Sunset of LIBOR and the Rise of SOFR: What You Need to Know

by Sarah Daniels November 30, 2020

For years, interbank offered rates, including USD LIBOR (London Interbank Offered Rate), have been the most-referenced benchmark interest rates in the world. However, global indexing is moving to risk-free rates, including the Secured Overnight Financing Rate (SOFR) in the United States, with pivotal milestones taking place between now and the end of 2021. Here’s what this transition means for the multifamily sector, dates to watch for, and steps to take now. View higher resolution version of timeline above here. What is SOFR? SOFR is based on overnight repurchase agreements, with cash borrowers posting U.S. treasuries as collateral with an agreement to buy them back at a specified date. The daily SOFR can be subject to spikes, so agency lenders will use a 30-day compounded average to smooth out volatility based on recommendations from the Alternative Reference Rates Committee (ARRC). SOFR has no credit component, so the market will likely accommodate by charging some additional spread for new SOFR-based products. While enough futures and swaps activity has transpired since 2018 to develop the shorter part of a term curve, the longer part of the curve will be addressed by fourth quarter of 2020, particularly as the CME and LCH clearing houses convert …

November 30, 2020

Content Partner Heartland Feature Archive Lument Midwest Missouri Multifamily Ohio RED Capital Group Wisconsin

Cleveland, Milwaukee & St. Louis Multifamily Forecasts Indicate Case for Caution

by Sarah Daniels November 19, 2020

In earlier research, we found that investors may find advantageous risk and reward tradeoffs during the pandemic in often overlooked Midwest secondary markets. For the most part, average rent and occupancy metrics in these markets continued to rise throughout the summer, recession notwithstanding. Together, their inviting cap rates, rising NOI and low historic income volatility form a fairly compelling investment predicate. We also found that positive performance attributes were not limited to the region’s most robust economies. Even metropolitan markets that have experienced slow demographic growth — like Cincinnati and Detroit — posted surprisingly good revenue growth. Can the same logic be extended to metropolitan areas experiencing actual demographic decline? A review of recent trends in three “high-yield” markets with negative population growth – Cleveland, Milwaukee and St. Louis – shed some light on the question. View higher resolution version of chart above here. With respect to occupancy, the answer is yes. In fact, property level data published by Yardi suggest that market conditions in each of these metro areas has been constructive since February. Between February and October, average occupancy among stabilized same-store property samples increased by 14 basis points in Cleveland and 10 bps in St. Louis, in …

November 19, 2020

Content Partner Heartland Feature Archive Lument Michigan Midwest Multifamily Ohio RED Capital Group

Slow and Steady Wins the Race: The Case for Multifamily in Cincinnati and Detroit

by Sarah Daniels November 12, 2020

Investors favor multifamily markets with brisk population growth and meaningful barriers to entry. But can a case be made in turbulent times for slow-growth Midwest cities characterized by weak entry barriers? View higher resolution version of chart above here. Midwest metro areas with relatively healthy demographic growth — Columbus, Indianapolis and Kansas City come to mind — have posted constructive performance trends during the pandemic recession so far, particularly with respect to rent. Among the 10 largest Midwest markets, Columbus recorded the fastest rent growth over the past three years (18.2 percent, according to Yardi Matrix) and nearly the fastest since the beginning of the pandemic (2.9 percent between February and October). Indeed, Columbus, Indianapolis (2.7 percent) and Kansas City (2.3 percent) respectively recorded the third, fourth and sixth fastest rent trends in the region since February, and each readily topped the -1.1 percent U.S. primary and secondary market average. The fastest rent growth in the region, however, was recorded by two metro areas not blessed with brisk population growth — Cincinnati and Detroit. Between February and October all property rents increased 3.0 percent in Cincinnati and 3.4 percent in Detroit, figures exceeded in only a handful of markets nationally. …

November 12, 2020

Content Partner Heartland Feature Archive Indiana Lument Midwest Missouri Multifamily Ohio RED Capital Group

Secondary Midwest Markets: Investor Refuge or Flavor of the Month?

by Sarah Daniels November 5, 2020

More than a few column inches in multifamily media this year were dedicated to the implications of coronavirus on the housing preferences of renter households. Many theorize that the pandemic is leading householders to reexamine their attachment to urban life and consider suburban alternatives that offer larger floor plans, better schools, free parking and unit access without an elevator ride. Available data suggest there is something to this notion. Occupancy and rent in core urban neighborhoods in the primary markets have declined, substantially in the highest-cost cities. Suburban performance, by contrast, is strengthening. What is less certain is whether the same phenomenon is working to the benefit of secondary markets as well as big city suburbs. The jury is still out but investors already have stepped up acquisitions in the Sunbelt growth markets to exploit the opportunity — Austin and Phoenix were among the nine most active property markets in the third quarter, and Raleigh and Charlotte were just a step behind – but what of the staid and stable Midwest? Columbus, Indianapolis and Kansas City (the “Midwest Three”) stand out among Midwest cities as the secondary markets most likely to attract gateway city refugees. Each offers renters most of …

November 5, 2020

Content Partner Features Industrial New York Northeast Northeast Feature Archive Walker & Dunlop

New York Industrial Innovation Spreads Nationwide

by Sarah Daniels November 2, 2020

Despite the negative impact of the pandemic on many areas within commercial real estate, industrial assets continue to attract interest as a favored sector of many lenders and investors. The industrial market is outperforming others throughout this period of disruption. E-commerce growth has resulted in growth in the industrial sector as the need for last-mile delivery and third-party logistics space increases. Similarly, urban infill demand has grown in supply-constrained markets. Finally, the supercharging the industrial sector has created a need for new construction in this asset class, and construction lenders are finding new opportunities to earn higher returns. View higher resolution version of chart above here. Industrial Market Trends In major urban markets — New York City included — residents increasingly expect two-day delivery, next-day delivery and even same-day delivery. As a result of these shrinking delivery windows, the need for local distribution centers and last-mile facilities has increased significantly. The way people purchase and receive products has changed drastically, and the industrial sector must adjust to meet the demand. The nation-wide stay-at-home orders implemented at the outset of the pandemic caused e-commerce to experience exponential growth. People who had never shopped online began adapting to this trend. This created …

November 2, 2020

Content Partner Heartland Feature Archive Lument Midwest Minnesota Multifamily RED Capital Group

The Twin Cities: An Unlikely Shelter in Turbulent Multifamily Markets

by Sarah Daniels October 27, 2020

The Minneapolis metropolitan area made plenty of headlines in 2020, and much of the news wasn’t good. The social fabric was frayed, and property damage estimated at between $250 million and $500 million ensued. On the surface, the Twin Cities appear unlikely sources of stability and relative safety for multifamily investors, and yet market performance and property value trends have so far proven resilient in the face of adversity. In comparison to many of the primary markets and its regional rival, Chicago, Minneapolis has navigated the effects of the pandemic recession remarkably well and may represent an attractive option for investors who remain committed to the urban mid-rise model, as well as those considering increased exposure to suburban situations. The Minneapolis economy was by no means immune to the effects of public health-related lockdowns. Payroll employment plunged by 270,000 jobs in March and April, representing about 13.3 percent of the February metro total. Although severe, pandemic losses fell below the national average (U.S. payrolls fell 14.6 percent) and were comparable to those recorded in Chicago and Milwaukee. Since April, the Minneapolis labor market has made considerable headway. The unemployment rate dropped to 7.9 percent in August, materially lower than the …

October 27, 2020

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