John Sebree is no stranger to Encino, Calif.–based Marcus & Millichap. He started in the firm's Chicago office in 1991 and opened the Indianapolis branch in 1997. In 2008, he decided to move over to Holliday Fenoglio Fowler as managing director, but now he’s back with M&M, as the new director of the company's National Multi Housing Group (NMHG), replacing Linwood Thompson, who originally hired and trained Sebree at M&M's Chicago office. Sebree took some time to chat with Multifamily Executive about his role and the market.
MFE: What prompted you to return to Marcus & Millichap?
Sebree: I had been doing brokerage for a long time. I loved brokerage and had always been a foot solider. That’s the part of the business that I enjoy. When they first approached me, it was not a quick decision because of the transition from being a broker to joining management. It took a little while for me to see myself in this role. But Marcus & Millichap is a great company. I think it’s positioned to have some amazing growth and really do some impressive things from the standpoint of client service and increased market share going forward.
Since I left [in 2008], there’s a new president in place and there’s a restructured management group. Once I saw that and got to know the senior management, I was extremely encouraged about their vision and passion for the business.
MFE: What are your initial focus and initiatives taking over the NMHG?
Sebree: The past few years have been tough for everyone in the business, especially brokers. Two positive things that came out of the market dislocation for the brokerage industry are refocusing on fundamentals and [realizing] the importance of client relationships. Even though apartments are doing better than other asset classes, it certainly doesn't mean that it’s easy to be a good broker, and that's resulting in the need for better skills, especially underwriting and proactive selling to the right buyer pools. We’re fortunate to have a large group of experienced and talented agents, but we're undertaking a major retraining initiative and updating our tools and client services. We’ve got some amazing talent and some guys with a lot of years who really understand the business. Our initiatives are designed to position the company as the ideal choice for research, acquisition opportunities, financing, and property sales for apartment investors across the country.
MFE: How will you do that?
Sebree: Upgrading our approach to our financial analysis and upgrading our relationships with lenders in the market through Marcus and Millichap Capital Corp. will be extremely important. I think we're well positioned to add to our sales staff. Over the past couple of years, that hasn’t been as much of a priority because it was more important to support the existing sales force and their client base. If you look at sales figures, the 2011 numbers picked up by 20 percent to 25 percent, and 2012 should pick up even further. Marcus & Millichap is already the dominant broker by number of transactions, but we only have a 13 percent market share, which leaves a lot of room for growth. Our objective is also to reach out to other successful brokers in the marketplace who are looking for a better environment and to new professionals getting into the business.
MFE: Given the success of apartments compared with other sectors, are you seeing increased investor interest?
Sebree: There is an enormous amount of money chasing apartments right now. Two years ago, and even a year ago, the majority of investors were chasing Class A apartment product in first-tier markets. As more capital flowed to top-tier assets and markets, cap rates in that segment recaptured pre-recession levels. Going forward, more investors will be looking at Class B and B- assets and quality and secondary and tertiary markets, which offer higher yields. We’re seeing a continued flow of equity into apartments, but I see that capital is starting to spread out a little more.
MFE: Do you think there’s the potential for an asset bubble in the multifamily sector?
Sebree: I don’t see a bubble developing in the multifamily side of the business. I think some people may make more money than others, but I don’t think we’re going to reach a point where we wake up one morning and find that our assets are valued 20 percent less than a year ago. Remember that over the past 24 months, the high-end assets that traded the most and appreciated the most were high-quality, low-risk properties acquired with low interest rates and high probability of solid rent growth. Going into 2012, pricing is much richer for these types of core investments, and that's why we see more sales in B and value-added situations, as well as development.