CEO Perspective: What Inning Are We In?

It's a great time to be a multifamily owner, investor and developer, experts say. But nobody can really predict how many more years the industry can squeeze out of this upturn.

Borrowing the classic baseball analogy, we asked five of the industry's top CEOs "What inning are we in?"

“I’m a fifth, sixth inning sort of guy. Actually, I’ve moved the game back a little bit. I was a little bit more concerned at the beginning of the year, but the forces I’m seeing in play would lead me to believe the game’s gonna last a little longer, or it’s going to be a 10-inning game instead of a nine-inning game. There are three drivers to this: there’s supply, demand, and, then, the wild card, single-family for-sale housing: Is it going to come back? I don’t see single-family or for-sale or condos in most of our markets coming back anytime soon. Mortgage money is tight; the banks have been sued until the cows come home. Single-family and for-sale is really a capital-driven thing. If money is plentiful, people will buy. And I don’t think that spigot is going to open anytime soon.”

Rick Graf, president, Pinnacle
Rick Graf, president, Pinnacle

—Greg Mutz, CEO, AMLI Residential

“It’s interesting. I was driving to the airport and there was this big discussion—apparently, the incoming commissioner of baseball has convened a panel to figure out how to shorten the game. But we don’t necessarily want the game shortened here; we want this game to keep on going. I don’t know; it’s hard to tell the answer to this question, but it feels like it’s the fifth or sixth inning to me. The question is, are there extra innings involved? Are we going to have a rain delay? I’m not necessarily sure, but I think we’ve got a ways to go given the demographics, given what appears to be the wind in our sail. We’ve been on a great run. We’ll see how long that goes. Most of us with gray hair have seen this movie before—it gets fevered up; then, what happens? So I don’t know.” 
—Rick Graf, CEO, Pinnacle

“I’d say the fourth or fifth inning. GDP, the gross domestic product, is hovering between 2 and 3 percent, which is generally considered by economists to be an OK level; [there’s] low inflation, 50-year-low interest rates, and the inability of banks to lend crazily like they did [when it] put us in the Great Recession. 
So I would say it’s protracted good times—I call it the “Leave It to Beaver,” 1950s era of the economy. [There’s] nothing out there that really will derail this economy. And there’s probably nothing out there that’s going to cause it to be overheated like it was in ’07 before we had the crash. There’s still too much concern that not enough Americans are back to work. So I think we could have a two- or three-year run. This is a good period to be in the business.”
—Ed Pettinella, CEO, Home Properties 

“In thinking through the question, my view is you make money in this business, one, through development—I score that out at the fourth inning. Second, operationally, I’d give it a fifth inning. The third is buying and selling assets—[that] feels like the seventh. So that’s kind of the way I think about the business. I think you can overlay markets and come up with a different mix, but you make money in the business those three ways, so I tend to answer it that way. The truth is, supply is not going to be the derailer that it has been in this industry—development has always killed us off. I think, today, there’s more data … banks are better informed about their lending patterns, and there are a lot fewer banks to start with, so the capital flow is going to be a heck of a lot better in cutting off the supply before it drives us into what we’ve had in the past.”

—Tom Toomey, CEO, UDR

“From our perspective, it really depends on what markets you’re in. We’re heavily focused in California; we are in 10 states but with a heavy presence in the West and Southwest. And for example, in Los Angeles, we think we’re in the very late innings when it comes to acquisitions. Prices on existing projects are approaching replacement costs—it’s difficult to make the numbers work. But we think we’re in the earlier innings when it comes to development. As of now, we have a dozen different projects between San Diego and San Francisco that we are either entitling or we’re building from the ground up. So we think we’re in the earlier innings when it comes to that.”
—Sean Burton, CEO, CityView