THE MAP OF WHAT APARTMENT financiers need to know for the second half of 2012 and beyond divides roughly into three parts: what happened, what's happening, and what's going to happen. Yes, just like all Gaul of old.

Just what's happened in apartment and housing finance in the past half decade—simplistically—scared the living daylights out of just about everybody in the game: borrower, lender, investor, developer, or property manager. This is for good reason, in light of what was lost. Fear continues to play an essential role in any and every risk–reward analysis for the funding of new and rehabilitated apartment investments. Painfully, the marketplace cured one and all of two beliefs regarded as sacrosanct: one, that houses would never lose value; and two, that household formations would only ever grow and never shrink.

What happened was that both those coveted tenets, thought to be inviolate, broke big-time, and destroyed not only huge amounts of financial and economic capital, but an entire zeitgeist that sprang directly from the virtuous cycle of belief, market dynamics, and confirmed belief.

Now, what happened, and its consequence, explains to a fair degree what's happening now in housing and apartment finance. Fundamental demand has kicked back in, based to an extent on stabilization in jobs and incomes, and household formations are pressuring available supply of for-rent units. This is what was supposed to happen. When fundamentals come back, investment is supposed to swell, fast.

However, what we see playing out are reflexes among developers, property managers, and investors all still keen to avoid a recurrence of pain. They're hypersensitive to the pain of loss, including lost belief in the basic building blocks of housing, and the lost instinct to give the benefit of the doubt under any circumstances whatsoever.

So, most of the apartment projects that are getting a green light to move forward now are risk-averse projects. If we're to believe what we hear, many more projects that would validate themselves by virtue of demand fundamentals still fail to complete their race for funding because there's something about them that triggers the fear reflex among potential investors and lenders.

What's to be done? What plans of action need to kick in and begin to be executed when only a small portion of the needed investment and lending for new and improved apartments is flowing in, and many potentially profitmaking projects don't make the cut in a hyper–risk-averse environment?

This is where “what's going to happen” fits in. What's going to happen is that the very lines between finance and operations will begin to blur. To get deals done, property owners and developers are going to have to calm potential stakeholders' nerves by showing operational discipline like never before. All the focus, care, and ingenuity that go into completing a capital stack need also to go into managing operations, and a good part of that approach is managing demand.

In this issue of Apartment Finance Today, we formally collapse the barriers that separate the discipline of finance from the disciplines of operational excellence, including creating demand among young adults by offering them a fully connected community.

Also, with this issue, we formally turn over leadership of the content direction of the magazine to someone who's eaten, slept, and breathed apartment finance for seven years now, Jerry Ascierto. With Jerry, we're confident you're going to continue to know what happened, what's happening now, and what's going to happen better than from any other source in the industry community. He and his team are that good, and we're proud to turn them loose with a refreshed sense of mission.