DALLAS—Paul Yazbeck and Jon Krebbs, previously of Sperry Van Ness, recently launched a new commercial real estate brokerage firm. The Multifamily Group will focus exclusively on the sale of B- and C-class multifamily properties in Texas and surrounding states. In the first three weeks of operation, the pair, along with a five-person team of analysts, secured exclusive listing assignments for 836 units in Texas, Arkansas and New Mexico. In this exclusive, Krebbs recently discussed the decision to launch the firm, the B and C focus, and the market trends at play for the foreseeable future.
GlobeSt.com: Why was now the time to start a new venture?
Krebbs: Paul and I had several strong years of production and will have even more transaction volume this year. We each looked at our options heading into 2018 and sought the advice of our clients, consultants, family and friends. Ultimately, we decided that continuing to work together and forming our own firm made the most sense in both the short- and long-term because we have complementary skill sets. Paul's an incredible negotiator with well-established client relationships. My expertise is in marketing and underwriting.
So, we combined our teams. Two of our analysts will move into production soon and we believe that our consistent deal flow and culture will be attractive to new brokers and experienced brokers as we grow. We plan on opening more doors and closing more deals for clients.
GlobeSt.com: Why the focus exclusively on B and C multifamily properties?
Krebbs: The transaction volume is significant. There are over 3,100 multifamily properties in DFW (50 units and above) and 60% of those were built before 1990. Every few years, these properties need fresh capital and are either sold or refinanced. The costs to develop and build new multifamily are so high that almost all new development caters to the renter by choice and as a result, there very little new B and C housing units coming online. The constraints in new supply, coupled with the job growth in our region, have led to higher demand for units, higher rent growth and higher returns for multifamily investors. It is an incredible time to work in the B and C multifamily space as a broker and as an investor.
GlobeSt.com: What is unique about the listing assignments you have been awarded?
Krebbs: All of the properties are C class, built in the 1960s and 1970s. They are all are value add and have significant upside potential. When we are fortunate enough to get listings, we make a lot of noise and fully expose the opportunities to all buyers and brokers to ensure the best execution for our clients.
GlobeSt.com: What are the market dynamics at work that you foresee in the coming year?
Krebbs: Interest rates are a huge concern right now. The rate on a 10-year treasury drives the cost of debt. The 10-year treasury rate hit a four-year high recently and is up 45 basis points since the first of the year. Strong economic data, inflation fears and predicted Treasury auctions led the selloff, which raised the rates. Cap rates could creep up if rates stay high for the rest of the year.
Competition among buyers is another market force. An 810-unit deal we marketed last year had over 30 tours and 12 offers. Another 305-unit property we marketed was a loan assumption, while less desirable, had 12 tours and six offers. Hard earnest money is the new normal and more buyers are asking for access agreements to compensate for the shorter due diligence time frames.
More and more deals are getting done off-market. Of the 13 deals Paul and I did last year, seven were done off market. In B and C, you have to go and get the business. It's always a bit of a grind and is very competitive, but when you connect the dots, it is very rewarding.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
