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LOS ANGELES-“From a transactional standpoint, there is still a huge amount of capital looking for assets in the multifamily sector and it doesn't seem to be slowing down.” So said Rick Graf, president of Pinnacle Family of Cos., during the Industry Leaders panel at ALM Real Estate Media's RealShare Apartments 2013 last week. “We are still 30 or 40 deep on quality assets in terms of buyers.”

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There is also a lot of foreign capital flooding into the multifamily space, Graf said to the 2,000 or so attendees in the room, from Dutch investors to Germans, as well as Canada and Chinese investors.

Moderated by Sule Aygoren, editor in chief of ALM Real Estate Media Group, panelists talked about whether or not we were in a “leveling off period,” to which Graf said that there is some pullback in rent growth, but not as much as people maybe think.

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Bill Witte, president and managing partner of Related California, said that some leveling off is healthy when you have 20-25% year over year rent growth in areas like the Bay Area for example. “A lot of this data you read is national, but a lot of it depends on submarkets.”

Witte warned that you have to be careful when you apply these metrics and look at where you are applying them. “As long as there continues to be spreads … and as long as interest rates stay relatively low, you've got a lot of capital chasing this product.”

From the sale activity standpoint, Jeff Day, CEO of Berkeley Point Capital, pointed out that there has been an adjustment period, but he is “bullish on the demand side… it's really more of a function of an affordability ceiling,” he said.

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When asked about the possibility of overdevelopment in the multifamily sector, Graf said he was more optimistic than most. “While in some cases it appears that there are some potential challenges—markets in discussion being places like Seattle and DC—I am not sure everything on the board will be built.”

In looking at the condo versus rental market, Witte said he prefers rental. “We tend to keep what we develop, but we tend to operate in very high barrier to entry and high value areas.” And often times, he said, land prices, size of the project, and other factors, force you to either not build or move from rental to condos.

“With condo, there better be a high return,” he added. “It is really a function of pricing that pushes you into a value that can't be supported by rentals…Also a location to justify those values.”  

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From a financing standpoint, if there were a hole right now, it would be in large for sale condos in my view, added Day.

Witte continued that “If you are positioning as a condo, unless it is a very unique location, you are going to face a more skeptical community … you need a good slug of equity.”

This particular cycle, Witte noted, seems to be people piling in to buy core assets. “Now a lot of people are going to value-add because it is the relatively less touched asset in this asset class, but they are having some trouble finding the product.

To read the full transcript of the discussion, including opportunities in luxury, high end rents, smaller units and more, be sure to check out the December issue of Real Estate Forum for all the details.