Street Smart Success

To get the maximum return on Multifamily properties, in-house management is a requirement. Third party managers are focused on chasing new and larger clients, while your property is a lesser priority. They also get paid on revenue, so they don’t pay as much attention to managing expenses. Additionally, they move their best employees to properties owned by their larger clients. Todd Dexhierner, partner of Endurus Capital, improved his occupancy 6-7% across his properties, and increased NOI 40% after switching to in-house management. It’s hard to outsource caring, and no one cares more about your property as much as you and your investors. 

Despite challenges, the U.S. is still an economic behemoth with extraoridnaty productivity and innovation. Over time, both the stock market and Real Estate have ridden out downturns and performed and created massive wealth. That’s why you need to stay active and hold for long periods of time.  Five years or less is often not enough time to expect execution of a business plan. Peter Linneman, Principal of Linneman Associates, is a prolific multi-decade investor and founder of Wharton's Real Estate Department and the Zell-Lurie Real Estate Center. Peter Is bullish on Multifamily, despite short term headwinds in many markets.

Economic strain is weighing on renters. The prices of gas and overall inflation is taking its toll. At the same time, expenses have skyrocketed, further adding to the challenges of operating multifamily. As a result, many operators are putting their emphasis on maintaining occupancy versus growing their portfolios. David Lamatinna, Principal at Arrowhead Properties, has over 20 years’ experience in acquiring, renovating, and managing C class apartment communities throughout greater Boston. Having a tight geographic focus, combined with an experienced operator, mitigates a lot of risk. There’s no substitute for an operator living in the market they operate in. 

Although there’s $150 billion in debt coming due in Multifamily in 2026, most operators are either putting more money into their deals or working out arrangements with their lenders. There have been few foreclosures or short sales.  Since the fundamentals are still solid in most markets, it’s mostly the financing that’s been challenged. Andrew Cushman, Founder and Principal Vantage Point Acquisitions, operates a portfolio of multifamily assets in the Southeast, and has never lost investor’s money. Andrew has prioritized working hard to optimize daily operations in order to achieve maximum performance of his existing assets.

As urban neighborhoods with large ports have been redeveloped over the past few decades into residential and other uses, warehouse developments have moved to more inland locations. At the same time, ecommerce has created a need for tenants to be closer to their customer bases. Although there’s been an oversupply in major markets over the past few years, leasing has picked up. Brian Ker, President of Snowball Investments, has built a portfolio of industrial properties in the Tri-State region of New York, Connecticut and New Jersey with proximity and ease of public transportation into Manhattan.

Although multifamily has been difficult to acquire over the past few years because properties have been overpriced, prices are starting to correct enough for investors. Lenders are no longer able to hold on to non-performing assets and are starting to write loans down to get them off their books. Seasoned sponsors are getting back into the market and buying properties at steep discounts.  Brian Sutton, founder of Two Waters Capital, is buying properties in Atlanta where he’s based. Many properties in Atlanta were acquired at the peak with floating bridge debt and are distressed. 

Although more people are returning to the office, investor appetite for this asset class is still lagging. That’s why great deals exist for high-quality, well-located office where occupancy is improving. People are generally not working the full five days per week in the office, but 75% have returned at least part time, usually a minimum of three days. Rob Mann, Founder & President of Frontline Realty Capital and Touchstone Commercial Partners in San Franciso, is investing in great legacy office properties at large discounts. 

Although distress is here in multifamily, great deals are still largely elusive. There’s still a lot of money on the sidelines, and lenders are hanging on to properties with the hope they’ll increase in value. Ken Doble, Partner at Quantitative Realty Capital, sold off the last of his 9300-unit portfolio in 2023 and is back in the market. Ken has looked at hundreds of deals and only bought one since selling off his portfolio. Ken is a highly experienced operator who emphasizes the intricate details of all aspects of acquisitions, asset management, and operations. He generally avoids class C because of a difficult tenant base that can result in high delinquencies plus obsolete systems that end up eating into profits in ways you can’t anticipate. Class C also tends to get crushed in bad recessions.

When you’re dealing with family offices, you’re dealing with the top .0001% of America’s wealthiest families. As a result, your approach to allocating capital needs to be nearly flawless, with well-developed strategies and investment theses. Sal Buscemi, Managing Partner and Co-founder of Brahmin Partners, allocates capital on behalf of 13 Family Offices. Sal is an expert at building relationships with sophisticated families and helping them preserve and grow their legacies. Sal has vast experience across asset classes, including high-profile, recent pre-IPO opportunities such Space X and Stripe.  Sal has a well-informed, holistic view of the market that benefits his clients. 

After remaining firm over the past couple years, lenders are finally starting to capitulate and selling assets for less than loan amounts. This is resulting in great opportunities for savvy investors. Bruce Fraser, Managing Partner of Elkhorn Capital Partners, has jumped back into the market after two years of inactivity to take advantage of these great opportunities. Bruce is now seeing real value with distressed properties at deep discounts. Elkhorn Capital oversees over 2500 units across Tulsa and Oklahoma City. These markets have almost new supply and strong population growth. Bruce plans on expanding his footprints in these markets.