Rick Graf, president and CEO of Pinnacle, shared his perspectives on the multifamily industry as well as some advice this week as the keynoter of AFT Live: The Apartment Owner & Developer Summit in Las Vegas.
Graf, a 35-year multifamily veteran and at Pinnacle since 1996, said he has seen a lot of cycles come and go, but the most difficult one he has faced is the Great Recession, which affected all sectors.
“I don’t for a minute believe it’s that much better. We have a ways to go,” he said. “While our space has gotten better, there are still significant things to work through.”
Graf said he is not seeing the sustainable job growth needed across the country. “Most of the places I go, it doesn’t feel like the job market is back,” he said.
To weather the economic downturn, he said the company got lean, didn’t have much debt, and moved its corporate headquarters from Seattle to Dallas. The company also downsized its unit count, essentially firing some customers that didn’t fit its long-term vision. “Our footprint is smaller today, but profitability is better,” Graf added.
Some of his general concerns about the market today are the amount of new construction that’s coming down the pipeline and the affordability of multifamily housing, especially in coastal markets, since real wages haven’t increased.
He also has been watching the tax reform conversations occurring on Capitol Hill. “From an industry standpoint, we’re active, trying to be in the middle of the discussion,” he said.
As for the future of Fannie Mae and Freddie Mac and the call for a 10 percent reduction in multifamily loans from the government-sponsored enterprises (GSEs), Graf said he’s not concerned.
“That GSE space will be filled by other sources, like life companies and CMBS,” he said. “I think in the long term as long as there’s still a solid market and no major meltdowns, there will be capital and lending opportunities.”
Graf also doesn’t view the single-family rental sector as a threat, because those renters have different reasons for being in that type of home. He also pondered the lack of efficiencies of the single-family rental market with the large number of scattered-site homes that need to be leased and maintained. “A lot of smart money has gone into that space, and we’ve been approached by nearly all of the big players. But I’ve yet to figure out how I can make money doing it.”
Graf also shared two pieces of advice that he has learned over the years: Be nice to people and don’t burn bridges. “It’s a small business we work in,” he said.
He also reminded the audience to remember that the multifamily business is a team business. And a lot of the time it starts with the site-level people. “If you have great site people, it makes a huge difference,” he said.
Pinnacle owns and manages a combination of conventional, affordable, and military multifamily housing across the United States and touches a half of million people a day. “There’s always work to do 24/7 in the business because we deal with people’s homes,” Graf said. “We have an opportunity every day to do something good.”