Flat is the new up. Management matters. Certainty of execution is more important than price or value. Those were just a few of the takeaways from a roundtable of industry leaders at the Apartment Finance Today Conference in Phoenix,Ariz., last week.
“Take historical trends and conventional wisdom, and throw them out the window,” said Lee Harris, president of Cohen-Esrey Real Estate Services, who believes multifamily players need to be “brutally realistic” about both the values of their assets and the outlook for their portfolios and operations.
Looking at the economic landscape and the various factors at play in the multifamily sector today, the panelists described a back-to-basics approach to asset and property management. Many emphasized the importance of providing excellent customer service, communicating frequently with residents to ensure they can pay their rent and remain in their beds, and monitoring expenses carefully in order to push NOI, even if that means just to keep your returns—and margins—flat.
Rich Kelly, vice president of LumaCorp, is offering twice-monthly payment options for struggling residents, where their rents can be paid half on the first of the month, half on the 15th of the month. “We’re focused heavily on the management of our business right now,” he said.
Kelly also noted that the current marketplace will actually see two separate and distinct bottoms—the first will come when GDP and employment levels bottom out; the second will arrive when the discrepancies in the capital markets are resolved.
Ultimately, the panelists predicted that the market will begin to recover in 2010 at the earliest and by the start of 20112 on the more pessimistic end. Despite this slightly dour outlook, there are opportunities to be had in the market. Namely, “you have to look at the ‘recession-resistant’ areas of the industry,” said Kitty Wallace, senior vice president of Sperry Van Ness Real Estate Services. “Right now, that’s student, seniors, and affordable.”