In terms of strategy, you need to first look at the economy, and where multifamily fits into it. Our mantra is that you have to chase employment. In the past six months, there's only been three sectors of the economy that have had job growth. I call them the "employment triangle"--government/education, the energy sector and healthcare. So we're looking at opportunities where there is job growth in these sectors.

We're not naïve; back in the heyday of the TIC industry, a lot of people were underwriting aggressively and trending rents up. We're very conservative in our approach, so not every deal works for us. While our number-one priority is job growth, we're realistic. You can't say that just because there's job growth you can project 4% or 5% rent increases. We think rent increases are going to be flat, and pretty much everyone across the country is hurting. So the most important thing in underwriting properties is looking at the in-place revenue. If that revenue's in place and you can sustain and manage your property, it makes sense. So our strategy is chase job growth and then underwrite very tightly on existing rents.

GlobeSt.com: So, which geographic markets fall into that "employment triangle" you're seeking?

Lansdell: Right now, my concerns over the Southeast are significant; you're starting to see heavy vacancies there, and Florida and Atlanta are definitely struggling due to supply and job losses. The mortgage crisis actually helped sustain multifamily because although people are moving out of homes, they still need housing. But what you've seen is where the average household size was 2.3 or 2.4, it's pushing now toward 2.8, so people are starting to double up.

I see some great opportunity in the Northeast because we think government is going to be solid, and you have to create job growth there. The mid-Atlantic, other than the metro DC area, scares me right now. All of those areas that support government--Washington, DC, suburban Maryland and parts of Virginia--are going to see solid job growth, so we're going to be looking in those areas.

In all, we really like tertiary markets. Why? Well, if you look at Houston alone, it has something like 575,000 apartments. But you take a tertiary market like Corpus Christie, TX, there's a solid energy industry, government through the military presence and there's five or six hospitals--the employment triangle is there. So it makes a lot of sense.I'm willing to look at tertiary markets. If the employment triangle is there, I'm willing to look at a deal. Because really, for our investor pool, ultimately, the proof of the pudding is in the returns.

GlobeSt.com: Is there a specific type of property you're going after?

Lansdell: My philosophy has always been that after debt service, taxes and insurance, your number one cost of running a property is personnel. It takes the same number of people to run 200 units as it does 250 or even 275. So economies of scale really makes that 250 units and above number our sweet spot as far as operations. But that doesn't preclude us from getting in the 100-150 range.

In terms of product lines, we have a variety of funds, from a vulture fund, a notes fund to a DST structure, so we are actually willing to deliver product along all types of classes--core A, core B, value add. There's an incredible opportunity in the market right now for value add because it makes so much sense when you put in $5,000 a unit and change the rent structure on your property. Not only are you going to get an increase in NOI, but you're also going to get cap rate compression. That's a great spot to be. The A properties today are going to be a little more restricted in terms of how high they can push their rents.

GlobeSt.com: What's development looking like now? Does TNP have any interest in developing assets?

Lansdell: In properties we buy, one of the most important things to consider is your exit strategy. A lot of institutional players are not buyers in the market right now, and the REITs and pension funds and being forced to liquidate their portfolios and take write-downs and the like because they're market to market. So the question becomes, what is your exit strategy? Whether it's two years or three or four, there is no significant supply that will be delivered in the multifamily sector over the next three years. Even if you can get a construction loan, it will require a large amount of capital. Even today, if I were to find a raw piece of land, go through the entitlements, get it financed, built and get it through lease-up, you're looking at three years. I don't see anyone doing any significant amount of construction in 2009. Your delivery is looking at 2013, possibly. That makes a 3.5-year period for deliveries, but there's population and job growth, so you're going toward a tight market for multifamily.

GlobeSt.com: What's your typical hold period?

Lansdell: Typically, what we're trying to do is get 10 years of debt. That gives you an opportunity to hit the cycle at the right spot. What we don't want to do is have debt that's going to force our hand to sell a property at the wrong point in the cycle. Right now, my best guess is you're looking at a five to seven-year horizon before you're going to hit some solid 6% to 7% rent increases and some cap rate compression, depending on the property and location.

GlobeSt.com: Financing has been pretty tough to obtain, although Fannie Mae and Freddie Mac continue to lend to multifamily.

Lansdell: Capital is key. There's no question Freddie and Fannie have tightened their underwriting criteria. It's not a big deal for us, because we're underwriting on existing rents. The hardest thing for Freddie here in the past four months has been getting comfortable with the DST structure.

Also, as interest rates came down on the 10-year Treasury, the spreads went up. We're seeing interest rates in that 6.1% to 6.25% range. You can still get an interest-only loan for maybe a year, possibly two years. And Freddie and Fannie are asking for more reserves up front. So yes, money is available, capital is key if you can hit the LTV ratios, you're seeing spreads move up and down a little bit, keeping interest rates in that 6.1% to 6.25% range.

GlobeSt.com: Another major problem has been the gap between what sellers are asking for properties, and what buyers are willing to pay. Has that gap narrowed somewhat, or is there still a discrepancy?

Lansdell: The government bailout program has basically crippled real estate, putting everyone at a standstill. By giving the banks the money so they can meet their daily liquidity requirements, you're not forcing the owners of those loans to sell, so as such, they're not being forced to take any write-downs on stuff other than they've already taken down. The banks aren't forcing sellers to sell; they're willing to hang in there because the bailout's giving them some time.

I read that starting in 2010, there's going to be $80 billion to $100 billion of debt coming due. The question is, what are the banks going to do with that? What's happening right now, in the next 60 to 90 days, is everyone's still trying to get that greater fool that's out there that's willing to pay. Though they understand cap rates have basically gone up about 70 basis points, sellers are still being a little unrealistic as to what the returns are. Ultimately, the market in multifamily is based on earnings, and those returns need to hit relatively what the bond yields are.

People right now are just sitting tight. In Orange County, for instance, I read that only four properties in excess of $20 million changed hands, but there were 62 properties that were listed and get sold. What that tells me is people were not willing to lower their prices to sell their assets. But I do think you're going to see some of that stuff happening as we move through this year, as maturities near, as banks start to deal with reality and realize they do have some loans they need to deal with, and some owners just don't manage their property well.

GlobeSt.com: So given all of that, how does a company survive in this market?

Lansdell: Managing your asset is really one of the most important things in making sure your investors get their expected returns and yields and stuff. In this economy, that's the most important element you can find the right property, but once you get it, you have to manage it.