Back by popular demand at this year’s Multifamily Executive Conference will be the annual Executive Power Panel, where top leaders including Avanath Capital Management chairman and CEO Daryl Carter, GID COO Greg Bates, and Pinnacle president and CEO Rick Graf will reveal how they are dealing with the latest market conditions and preparing for the future.
Multifamily Executive checked in with them in late spring to discuss their top concerns and how they think the COVID-19 pandemic will reshape the industry.
“Clearly, there is still tremendous concern surrounding COVID-19 related matters and how the lingering impacts of the economic downturn will affect our business and teams,” says Graf.
However, he adds that the pandemic has pushed the industry ahead in many ways, particularly in the area of technology. “Our ability to provide ‘no-touch’ or ‘low-touch’ services will be paramount to our customer base. The industry will also have to meet new requirements for the utilization of living space now that more residents will be working from home on a long-term basis.”
Carter says COVID-19 will have an impact on the physical configuration of buildings, adding that the industry will see more people “be more horizontal than vertical.”
The majority of Avanath’s properties are garden-style, where residents have their own separate entrances and no lobbies. “We think that will continue to be a popular configuration of housing.”
In addition, many of Avanath’s properties are in communities of color, and Carter believes more needs to be done to make these communities healthier. His firm already has a focus on wellness in its senior developments and has a number of other strategies, such as bringing farmers markets and cold storage lockers for grocery delivery to its properties.
“I think we are going to need to have a greater focus on better outcomes for communities underserved by institutional capital,” he says. “This pandemic has certainly shown the challenges in a lot of the urban communities. Given our resident base, we want to help be part of the solution of making high-density communities healthier.”
Bates adds that he has seen two silver linings from the pandemic. One has been the acceleration of the adoption of new technology by at least 24 months, and the second is that remote working from stay-at-home orders has forced active people management.
“We have benefited from the increased discipline of prioritizing work, establishing goals, and increasing accountability via tracking and measuring progress more actively,” he says. “You can get comfortable in the office and slip into routines. Work from home broke those habits and forced some positive change. Whether that’s sustainable or not is a big question mark for me, but over a three- to four-month period, we have adapted successfully.”
Outside of the pandemic, regulatory concerns, affordability, and financing are other key issues for the executives.
“We always worry about the capital flows of both equity and debt,” says Carter. “Money drives growth; without capital flow, it’s hard to grow a business.”
He says that he has been pleased with the current availability of capital and hopes to see that continue.
But his biggest concern remains the affordable and workforce housing sectors. “If you picked a date of Jan. 1 or Jan. 15, what is our biggest need? Affordable housing. You go to July, nothing has changed. We still have an abundance of demand for quality affordable rentals, and that continues to be a challenge.”
Graf and Bates also agree that addressing the affordability crisis is a top concern.
“We remain concerned about governmental regulations, such as rent control, affecting affordable housing in our nation,” Graf says. “While we agree that there are affordability issues, the resolution must rest with the private sector.”
Bates adds that rent control is not the answer. Rent control is the “single greatest exogenous threat facing the multifamily industry in my 20 years in the business,” he says.
He also is watching local government finances. “The pandemic has wreaked havoc on state and local budgets. A prolonged downturn is likely to exacerbate these issues,” Bates says. “Real estate owners and users will be watching closely as municipalities look to commercial real estate for much-needed tax revenues.”
The leaders also believe opportunities can be found in today’s uncertainty.
“The markets appear to be ripe for further consolidation of multifamily ownership and property management,” adds Graf. “There is an availability of capital and a continuing need for full-service firms to become a ‘one-stop shop’ for investors of all asset classes.”
Graf’s firm Pinnacle was acquired by Cushman & Wakefield earlier this year.
GID’s Bates also says he doesn’t foresee a meaningful pricing correction for core real estate, but opportunities can be found in land and new development during market dislocations.
“I also believe the fix and flip strategies caught ‘mid-execution’ in the downturn can provide attractive acquisition opportunities.”
Hear more insight from these industry leaders at the MFE Conference, Sept. 30 to Oct. 2, at the Bellagio in Las Vegas. For more information or to register, visit https://cvent.me/YgD1y0?RefId=edit.
