Jim Wilson, managing director of JMP Securities, said that Trump's policies will not have much impact on multifamily since exposure in CMBS to multifamily is modest compared to other types of real estate. “The real is, are lenders outside of the agencies potentially getting too aggressive? Eighty percent leverage on C-minus assets?”

Ian Formigle, VP Investments for the Laramar Group LLC, said some multifamily properties are offering eight-week concessions, sales are off and there's a spread between bid and ask, “but there are still deals. You just have to pick you spot. Where can you derive value?”

With regard to Fannie Mae and Freddie Mac, Gary Carmell, president of CWS Capital Partners, said he had heard treasury secretary Steve Mnuchin speak that morning and he was “not prepared to discuss agency reform; tax reform is a higher priority.” Expect more business as usual, but if the agencies are privatized, the first risk goes to private investors. However, “nothing will be happening for at least two years.” Meanwhile, Carmell said, multifamily can focus on green and affordable initiatives, as well as manufactured housing, to get a better discount on the spread.

Champion said in markets where rents are still about a third of income, “we see the kind of rent growth we've seen, but it's not where we'd like it to be.”

In discussing foreign investors in multifamily, Wilson said he's seen more interest from foreign-capital—as well as more-traditional US institutional capital—in the secondary and tertiary markets than there was two to five years ago, which he called “a very natural progression. There's a lot of capital around the world looking for a home, and multifamily is an attractive asset class as compared to other asset classes.”

When Franks asked the panelists about hedging the market in multifamily, “Should you diversify away from multifamily?” Formigle advised against it. “Do what you know how to do. Now is not a time in the market to mess with other stuff. Maybe pause and do fewer deals, but stick to what you know.” Champion said there are instruments you can buy to short the indexes.

Franks asked what foreign investments feel like in this sector, and Carmell said, “There are still capital flows from Asia. It's not quite what it was, but it's still pretty meaningful.” Formigle agreed that the interest is still there, and Wilson said he is working with foreign capital in the value-add space, and “there is interest going much further afield than in the primary markets.”

Franks asked if capital was chasing yield, and Formigle said rent growth has been poor in some primary markets, but if you can find an 18-hour city like Portland to invest in, with above-average job and Millennial population growth and an urbanizing core, that would be wise. He mentioned Milwaukee; Columbus, OH; Charleston, SC; and Kansas City, MO; as up-and-coming secondary markets with these fundamentals. “That's where you can find value: in places with good underlying fundamentals that haven't had capital flows before.”

Franks asked how a non-institutional market can change to an institutional one, and panelists said if you can get there on a direct flight, there's corporate-headquarters growth there and the weather is pleasant enough—there has to be an amenity greater than the weather to entice people to live there—the market has a good chance of becoming institutional.

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HUNTINGTON BEACH, CA—Exposure to multifamily in CMBS is modest as compared to other types of real estate, but the real issue is, are lenders outside of the agencies getting too aggressive? said panelists at the IMN Multifamily Forum here on Thursday. Speakers on the panel, which was moderated by Todd Franks, managing director of SVN | Investment Sales Group, “Multifamily Fundamentals and the Cycle in a Shifting Trump Economic & Political Environment” tackled whether the expected stimulus and looser government regulation will affect the multifamily industry and how.

Panelist Robert Champion, founder and CEO of Champion Real Estate Co., said we have to look at the micro and macro impacts of these potential policies. “Yes, they will loosen regulations, but in this industry, regulations happen more at the state and local level, which are the opposite of what's happen at the federal level.” In the end, it nets itself out, he said.

Champion also explained that there are three different cycles to watch—the business cycle, the real estate cycle and the credit cycle—each with its own timeline. Business cycles can last six to 10 years, while real estate cycles, which are a matter of supply and demand, can last 18 years on average. “Once every 60 years, a business cycle corrects itself at the same time as the real estate cycle,” as we saw in 2008 with the Great Recession. We are currently in the seventh year of business-cycle expansion. Credit cycles last 60 years on average.

“Central governments globally have almost reached the peak of what credit can be worldwide,” said Champion. “We will probably have some type of liquidity crisis event,” but his firm doesn't try to time the market.

Jim Wilson, managing director of JMP Securities, said that Trump's policies will not have much impact on multifamily since exposure in CMBS to multifamily is modest compared to other types of real estate. “The real is, are lenders outside of the agencies potentially getting too aggressive? Eighty percent leverage on C-minus assets?”

Ian Formigle, VP Investments for the Laramar Group LLC, said some multifamily properties are offering eight-week concessions, sales are off and there's a spread between bid and ask, “but there are still deals. You just have to pick you spot. Where can you derive value?”

With regard to Fannie Mae and Freddie Mac, Gary Carmell, president of CWS Capital Partners, said he had heard treasury secretary Steve Mnuchin speak that morning and he was “not prepared to discuss agency reform; tax reform is a higher priority.” Expect more business as usual, but if the agencies are privatized, the first risk goes to private investors. However, “nothing will be happening for at least two years.” Meanwhile, Carmell said, multifamily can focus on green and affordable initiatives, as well as manufactured housing, to get a better discount on the spread.

Champion said in markets where rents are still about a third of income, “we see the kind of rent growth we've seen, but it's not where we'd like it to be.”

In discussing foreign investors in multifamily, Wilson said he's seen more interest from foreign-capital—as well as more-traditional US institutional capital—in the secondary and tertiary markets than there was two to five years ago, which he called “a very natural progression. There's a lot of capital around the world looking for a home, and multifamily is an attractive asset class as compared to other asset classes.”

When Franks asked the panelists about hedging the market in multifamily, “Should you diversify away from multifamily?” Formigle advised against it. “Do what you know how to do. Now is not a time in the market to mess with other stuff. Maybe pause and do fewer deals, but stick to what you know.” Champion said there are instruments you can buy to short the indexes.

Franks asked what foreign investments feel like in this sector, and Carmell said, “There are still capital flows from Asia. It's not quite what it was, but it's still pretty meaningful.” Formigle agreed that the interest is still there, and Wilson said he is working with foreign capital in the value-add space, and “there is interest going much further afield than in the primary markets.”

Franks asked if capital was chasing yield, and Formigle said rent growth has been poor in some primary markets, but if you can find an 18-hour city like Portland to invest in, with above-average job and Millennial population growth and an urbanizing core, that would be wise. He mentioned Milwaukee; Columbus, OH; Charleston, SC; and Kansas City, MO; as up-and-coming secondary markets with these fundamentals. “That's where you can find value: in places with good underlying fundamentals that haven't had capital flows before.”

Franks asked how a non-institutional market can change to an institutional one, and panelists said if you can get there on a direct flight, there's corporate-headquarters growth there and the weather is pleasant enough—there has to be an amenity greater than the weather to entice people to live there—the market has a good chance of becoming institutional.