James Duncan knows not all markets are created equal.
The CFO of Jefferson Apartment Group (JAG) is seeing strong growth in some while others are slowing down, but he isn’t writing the slower markets off just yet.
And while some institutional investors are scaling back their appetites in potentially overheated markets, Duncan believes it hasn’t affected the liquidity for multifamily developers looking to strike a deal.
“I think they’re being more cautious relative to their investment in markets that could have some supply issues,” he said. “And where we’ve seen others get too cautious or pull back a little bit, we’ve seen other equity providers step in.
Duncan was one of about 100 multifamily finance professionals who responded to Apartment Finance Today’s annual CFO Survey. The survey was recently conducted to peek into the thoughts of the industry's best and brightest as they rev up strategic planning efforts for the upcoming year.
“I think we’re keeping our eye on certain markets as the supply really starts to deliver into the market during the second half of this year and how that will impact our traction to raise rents,” he said.
Duncan and 77 percent of the multifamily finance professionals surveyed said they plan to raise rents in the next year, according to the survey.
Build, Buy and Operate
Since the McLean, Va.-based company’s inception in June of 2009, it has had a hand in the development of about 3,600 units. JAG expects to hit 5,000 by the end of next year with a focus on widening its grasp in the property management arena.
But that doesn't mean the company's acquisition activity has suffered.
“Debt rates have increased here over the last five weeks,” he said. “But, they’re still at historic lows, so if we find the right opportunities, we think it’s a good time to buy.”
And as job growth and optimism grow across the nation, demand will absorb the apartments in the current pipeline. “It may not be as robust though as over the last 18 months,” Duncan said.
As demand grows, competition to attract and retain tenants grow fierce in booming markets. Creative solutions to offer something extra, while boosting net operating income, are being added to communities.
For instance, pets have been and will continue to bring money into owner’s pockets as grooming stations, dog parks and specialized fees are added to communities.
“Somewhere between 25 and 35 percent of our tenants have a pet,” Duncan said. “We think that’s something that they value.”
Managers are also exploring options for those residents who don’t have pets. That’s where free wifi and cell phone towers come into play alongside utilities being paid by the residents.
“We’re continuing to push to make sure utility and trash costs are allocated to our tenants and residents,” he said.
Lindsay Machak is an Assistant Editor for Multifamily Executive. Connect with her on Twitter @LMachak.