CREJ

Page 4 — Multifamily Properties Quarterly — May 2020 www.crej.com Market Update The nation’s #1multifamily lender is lending in your backyard. Chase is known for our fast and efficient loan processing. It’s what has made us #1 in multifamily lending nationwide. With great rates, low fees, and a deep understanding of the local market, our team gets apartment loans done right. Catherine Murphy Executive Director (303) 512-1283 catherine.murphy@chase.com Josh Tidwell Executive Director (303) 244-3403 joshua.m.tidwell@chase.com Credit is subject to approval. Rates and programs are subject to change; certain restrictions apply. Terms and conditions subject to commitment letter. Products and services provided by JPMorgan Chase Bank, N.A. #1 claim based on 2018 FDIC data. ©2019 JPMorgan Chase & Co. All rights reserved. Chase is a marketing name for certain businesses of JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A., Member FDIC. 530052 MULTIFAMILY LENDING Low Fees | Great Rates | Streamlined Process M ultifamily housing per- formed exceptionally well over the course of this cycle, driven by the afford- ability of renting an apart- ment relative to owning a single- family house, and the younger gen- erations’ preference for leases and added amenities. Over the past few years, workforce rentals became increasingly undersupplied, as vacancy was near 20-year lows end- ing 2019. As such, investors predict only a temporary pause in demand for multifamily housing as a result of COVID-19. Survey responses suggest that we’ll see a short-term decline in investor demand for assets; those responses also highlighted the long- term positive outlook for investing in multifamily properties once the crisis subsides. Many investors, such as Craig Kalman, investment director at RedPeak Properties, do not believe there will be a decrease in investor demand for multifamily assets in the long run. “We feel fortunate to be in both the multifamily sector and the Den- ver market,” wrote Kalman. “Once this pandemic pass, we believe that Denver will continue to outperform the broader market. The record amounts of capital that were pur- suing multifamily before this crisis will still be out there looking for strategic assets.” Despite strong long-term fun- damentals, multifamily owners undoubtedly will have hurdles to overcome. With today’s added uncertainty, property finances should be closely monitored and managed, as a reduction in rental income is entirely possible while expenses may arise concur- rently. COVID-19 did not appear to have an immedi- ate effect on rent growth; however, the volume of moves likely will slow significantly in the coming months due to the unemployment, eviction moratoriums and general uncertainty. Consequently, owners are taking additional steps to retain tenants to protect the bottom line. Flexible payment options have been an excellent strategy to pro- vide not only financial relief for residents but also create a pathway for them to stay in their homes. In a statement regarding the programs they have implemented to help minimize the payment burdens for their tenants, one local manage- ment company is offering “a rent payment plan to residents who can demonstrate they have lost their jobs or have had their income significantly reduced. Qualified residents will be allowed to defer 66% of their April rent and pay the remaining balance in agreed-upon installments over the next two months.” Owners are taking a conserva- tive approach regarding expenses, as well. This same group stated that, “Maintenance is emergency only right now, which should help reduce expenses in the short term [and] we are pushing all property tax payments back to the extended deadline.” Maintaining healthy cash posi- tions is one of the main objectives in preparation for a potential pro- longed economic pause. Hugo Wein- berger, president at The Situs Group, said his company is, “Focused on maximizing cash flow through rent collection policies and expense controls. [We are] evaluating capital expenditures with a focus on com- pleting only necessary projects due to residents seeking affordability over renovated units.” Investors have acknowledged that there will continue to be some operational challenges, but also see the strength and stabil- ity in the demand from in-place residents and in the likelihood of newly formed households in this crisis choosing affordable rental options to meet their current hous- ing needs. Looking at rents and vacancies over the next six months, some investors currently believe that rents will decline slightly, and vacancy rates will rise slightly, which will alter the valuation process. Craig Lessard, director of acquisitions at WoodSpear Prop- erties, said that his firm remains interested in acquisitions but is struggling to appropriately price assets in the current environment. “Sellers want yesterday’s pricing, which reflects tight vacancy and 3% or 4% rent growth,” he said. “In the short term, it looks like the vacancy will be slightly higher, and rent growth will be zero. I think a pricing Investor sentiment remains strong despite hurdles Greg Parker Associate, The Price Apartment Group, Marcus & Millichap Please see Parker, Page 30 Marcus & Millichap