Multifamily leaders struck a cautiously optimistic tone on the second day of the Multifamily Executive Leadership Summit in Vail, Colorado. Speakers pointed to improving debt liquidity, a narrow window of construction cost relief, and emerging distress-driven buying opportunities—while warning that equity remains tight and operational discipline has never mattered more.
Capital at a Crossroads
Multifamily finance conditions are thawing—just not evenly. Liquidity has returned across agencies, debt funds, and CMBS, but investors are being selective, noted speakers during the capital markets session.
“If you have trouble accessing debt right now, you’re not looking in the right places,” said Dave Borsos, vice president of capital markets and student housing at the National Multifamily Housing Council (NMHC), who moderated the session.
Sharon Karaffa, president of multifamily debt and structured finance for Newmark, noted government-sponsored enterprises Fannie Mae and Freddie Mac have significant more capacity than last year, when they hit their caps for the first time in two years.
“They are going to be open all year long. I don’t think we have to worry about them running out of capacity mid-year or in the third quarter,” she said. “I think they will start to be aggressive and creative to try to hit those numbers—$88 billion cap for each of them. They need to do a lot of mission business. They are constrained by the $88 billion cap from the Federal Housing Finance Agency, but they also are constrained by a certain percentage of their business having to be affordable at 50% area median income (AMI) and 80% AMI. That’s a lot of units. As they build up the mission business, then they’ll be able to do more conventional business.”
Alecia Hill, vice president of housing preservation investments for FCP, also said she has no concerns around liquidity from the debt markets. However, she noted it’s difficult to raise equity capital in this environment and it’s extremely competitive.
Construction Cost Update
Developers agreed construction costs are at a multi-year low, with more bidders and strong subcontractor competition.
“We’re seeing incredible partnerships with subs on hard costs where on some deals they are doing them just to break even, but they know that our execution and site supervision knows how to keep them moving so they don’t lose money. That’s getting them more aggressive on the bidding side,” said Andrew Clay, managing director of the Mountain region for Alliance Residential. “It is a great window right now, and it’s not going to last forever. It may not go down any more than it is right now.”
However, he noted as soon as the subcontractors get wind of capital loosening, they will start to build back in profit and costs will go up.
CEO Perspectives
Leading multifamily CEOs Melanie French from RR Living, Tony Julianelle from Atlas Real Estate, and Jeff Klotz from The Klotz Cos. shared insights on the state of the industry and what they’re watching today.
“From my standpoint, I do think we are in a buyer’s market. From the owner-operator standpoint, it’s the time to be intentional and really focus on how we run the business. It’s a point in time when companies can no longer rely on rent increases. So you have to really focus on the other areas,” French said.
Julianelle agreed, saying the operator who wins is the one spending time on operational excellence.
He added that he believes the industry is experiencing a capital recession and not a demand recession.
“We’re just up against this moment in time when capital is harder to secure. You have plenty of people who need a place to live,” he said. “How is that going to change with near zero migration into the United States and some other challenges socially. We don’t know how that is going to play out.”
The CEOs noted they are seeing opportunities with distressed assets in the market and provided some realistic advice for the audience.
First and foremost is considering the condition of the asset.
“If the lender has been trying to work this out for two years with a sponsor who they think is maintaining that asset, they are not,” said Julianelle.
He added it’s important to set up early what capital is going to be needed to get the project back on track.
“I do think it's a very real opportunity. But I think you have to be very thoughtful about how you enter any of those transactions,” he said.
Klotz concurred, saying you need the right budget and a realistic approach.
“If you haven’t really turned around an asset that was significantly distressed and almost abandoned by the prior ownership, you are almost certainly going to underestimate the amount of time and money needed.”
According to French, when a property management firm takes on a distressed asset, it is all hands on deck and going back to the basics, starting with the due diligence.
“If you do a really great job of the due diligence, then we're able to give the owner a true perspective on what the cash outlay needs to be, how to achieve a target occupancy, and then a plan of what it’s going to take to get there,” she said. “You have to be committed to doing it the right way and doing it with a team on-site that makes the residents feel valued. We make sure we're doing it right the first time, and the important factors are keeping and valuing your residents because at the end of the day that is going to pay off not only for your lenders, but also for investors and for the employees themselves.”
NMHC Priorities
NMHC president Sharon Wilson Géno updated the audience on what the association is prioritizing for the year ahead, with a lot of concentration on housing policy and technology.
“At the federal level, housing has never been a hotter issue. It’s a mid-term election cycle, we have everyone’s attention. The bad news is that we have everyone’s attention,” she said.
The Senate continues to move ahead with the bipartisan ROAD to Housing Act, while the House has been furthering its Housing for the 21st Century Act.
Wilson Géno said the legislation won’t be a panacea to solve the nation’s housing supply issues, but they would be small wins and would help open the door for more advancements.
She also noted the NMHC is closely watching what’s happening on the state and local levels that could have an impact on the multifamily industry.
To help reeducate voters and lawmakers about the dangers of rent control, NMHC has teamed with the National Apartment Association, Mortgage Bankers Association, the National Association of Home Builders, and the National Association of Realtors to form the Housing Solutions Coalition. In addition, the coalition provides workable solutions to the housing crisis.
This year, the coalition also is focusing resources on the states where it sees the most risk: Washington, Colorado, Georgia, Virginia, Minnesota, and a handful of other locales.
The Real Estate Technology and Transformation Center (RETTC), an NMHC subsidiary, also is taking a role in advocating around innovation, including artificial intelligence and fee transparency.
“We are trying to work with regulators to allow for operators to be transparent because it is a business imperative and do it in a way that makes sense regionally and given the size of their company,” she said. “Everybody’s not going to do it in the same way, and everybody’s not going to have the resources to invest in it the same way, too.”
Wilson Géno also noted that the United States is behind in the construction space, still primarily building the same way as 100 years. To address this, RETTC will be tackling how the industry can create new and better investments in construction methods that bring costs down.
She concluded by saying industry stakeholders need to show up.
“Show up in the communities that you serve. If there is a question about housing, show up with your legislators at the state and local levels as well as the federal level and talk about the work that you do. There is no substitute for actually seeing and knowing someone who does this work. That does a lot, and credibility follows.”