Street Smart Success

Successful Real estate deals depend on capital raising and how the capital is structured. Many current projects are operationally sound but distressed in the capital structure. There are countless ways to construct successful deals, but this requires the right contacts and expertise with thousands of sources of debt and equity. Creighton Bildstein, Principal of PlattPointe Capital, works with property investors, owners and developers to alleviate the pain points that come with navigating the capital markets. Crieghton helps engineer the most efficient capital stack based on the constraints of a given project and his client’s needs.

3rd party property management can be notoriously difficult, but it can be successful if you manage it well. To make it work, you need detailed processes, actionable metrics, and weekly meetings that hold property managers accountable. Chris Lento, Founder and CEO of EM Capital, has been successful managing properties in other states by finding great property managers that execute on his business plans. Chris acquires mostly B Class multifamily properties across growing markets in the Southeast. Although these markets have been overbuilt, supply is being absorbed and rents will ultimately increase.

Mobile Home Parks aren’t pretty, but they consistently generate more cash flow than many other asset classes. As a result, a lot of newer investors entered the space over the past several years. Unfortunately, many of them have not achieved the results they anticipated because of the arduous nature and complexity of boosting occupancy and managing these properties. Mario Datillo, CEO of Celebrate Communities, has fourteen years’ experience in the Mobile Home Park business and is buying these communities in Florida and other growth markets. Mario also publishes a lot of educational content for new Mobile Home Park investors.  Mario targets a 10% cap rate upon stabilization by year two and IRRs in the high teens.

In most markets, multifamily has faced multiple headwinds. Over supply has impacted Class A, B and C properties as renters have sought out lower rents plus concessions. Occupancy has become a challenge, and rents are flattening or contracting. At the same time, insurance costs have doubled or even tripled, and property taxes have doubled in many markets. Concurrently, operating expenses have also skyrocketed. Brian Levredge, President of Pinnacle Asset Management, owns 60’s and 70’s multifamily properties in Chattanooga. He also manages properties for other owners. Recently, Brian’s expanded into acquiring suburban office properties.

To get the maximum return on Multifamily properties, in-house management is a requirement. Third party managers are focused on chasing new and larger clients, while your property is a lesser priority. They also get paid on revenue, so they don’t pay as much attention to managing expenses. Additionally, they move their best employees to properties owned by their larger clients. Todd Dexhierner, partner of Endurus Capital, improved his occupancy 6-7% across his properties, and increased NOI 40% after switching to in-house management. It’s hard to outsource caring, and no one cares more about your property as much as you and your investors. 

Despite challenges, the U.S. is still an economic behemoth with extraoridnaty productivity and innovation. Over time, both the stock market and Real Estate have ridden out downturns and performed and created massive wealth. That’s why you need to stay active and hold for long periods of time.  Five years or less is often not enough time to expect execution of a business plan. Peter Linneman, Principal of Linneman Associates, is a prolific multi-decade investor and founder of Wharton's Real Estate Department and the Zell-Lurie Real Estate Center. Peter Is bullish on Multifamily, despite short term headwinds in many markets.

Economic strain is weighing on renters. The prices of gas and overall inflation is taking its toll. At the same time, expenses have skyrocketed, further adding to the challenges of operating multifamily. As a result, many operators are putting their emphasis on maintaining occupancy versus growing their portfolios. David Lamatinna, Principal at Arrowhead Properties, has over 20 years’ experience in acquiring, renovating, and managing C class apartment communities throughout greater Boston. Having a tight geographic focus, combined with an experienced operator, mitigates a lot of risk. There’s no substitute for an operator living in the market they operate in. 

Although there’s $150 billion in debt coming due in Multifamily in 2026, most operators are either putting more money into their deals or working out arrangements with their lenders. There have been few foreclosures or short sales.  Since the fundamentals are still solid in most markets, it’s mostly the financing that’s been challenged. Andrew Cushman, Founder and Principal Vantage Point Acquisitions, operates a portfolio of multifamily assets in the Southeast, and has never lost investor’s money. Andrew has prioritized working hard to optimize daily operations in order to achieve maximum performance of his existing assets.

As urban neighborhoods with large ports have been redeveloped over the past few decades into residential and other uses, warehouse developments have moved to more inland locations. At the same time, ecommerce has created a need for tenants to be closer to their customer bases. Although there’s been an oversupply in major markets over the past few years, leasing has picked up. Brian Ker, President of Snowball Investments, has built a portfolio of industrial properties in the Tri-State region of New York, Connecticut and New Jersey with proximity and ease of public transportation into Manhattan.

Although multifamily has been difficult to acquire over the past few years because properties have been overpriced, prices are starting to correct enough for investors. Lenders are no longer able to hold on to non-performing assets and are starting to write loans down to get them off their books. Seasoned sponsors are getting back into the market and buying properties at steep discounts.  Brian Sutton, founder of Two Waters Capital, is buying properties in Atlanta where he’s based. Many properties in Atlanta were acquired at the peak with floating bridge debt and are distressed.