For 2023, CP Capital US is looking ahead at a more well-rounded year. The firm, which was founded in 1989, has largely been focused on multifamily since 2008, primarily joint-venture multifamily developments in suburban high-growth markets like Atlanta, Denver, and Phoenix.
For the firm, 2021 was a big sales year during the frenzied market, while 2022 was more about deploying capital. The firm closed on seven new joint-venture developments with good geographic diversity. This year, it plans to have some new developments opening and going into lease-up, while other communities will be ready for disposition.
The firm recently released a report on its long-term outlook for why multifamily investments will remain strong despite the uncertainty in the market.
“If you look backward, multifamily always seems to make sense. The need for housing and the need for a place you can afford to live is so great,” says Jay Remillard, managing director of asset management at CP Capital US. “There are some supply concerns for 2023 and 2024, but even with those heavy supply years we are still so far behind on how much housing is needed so we all feel good about the long-term prospects of multifamily.”
In addition to the supply-demand imbalance, CP Capital US points to ample dry powder as well as favorable employment, income, and demographic trends.
“The amount of money that’s been raised for real estate over the past few years that hasn’t been spent—we have seen $250 billion to $330 billion—is really exciting. That money was raised to be deployed,” Remillard says.
He also adds that another surprise from the report is the ever-widening gap between mortgage and rent payments. “I think it’s hard to put a downpayment on a house when you have student debt,” he says. “If you can save by renting, that makes a lot of sense.”
CP Capital US anticipates sales pricing to strengthen once buyers return to the market, with many industry experts predicting this to occur in the second half of the year once the Fed is satisfied that inflation is under control. However, Remillard thinks the market will start to pick up in the next several months.
“In speaking to people, I think there are deals that are going to come to the market in the next few months. A lot of people talked about waiting until the second half of the year, but I foresee maybe the machine starting up a little sooner to beat that rush in the second half of the year. A lot of buyers are eager to deploy capital.”
For Remillard, one of his big concerns for the next couple of years will be supply. But one positive is that the pipeline is expected to see a slowdown after the high unit delivery totals this year into next year due to projects being put on hold or canceled due to lack of financing or skittish investment partners. He says when the deals in CP Capital US’ pipeline deliver in 2024 or 2025, there should be less competition and an anticipated upward pressure on rent and occupancy rates.
But regardless of potential threats, like a recession or oversupplied markets, the firm remains optimistic.
“We have invested across multiple market cycles. We understand these types of conditions,” Remillard says. “We’re going to continue to apply the same strategy that has worked the last three decades, and we expect that to continue.”
