One Apartment CEO Tracks Growing Weakness in Class C Collections

RealtyMogul, an online real estate investing platform, has bought 16,000 apartments over the past eight years.

As the economic fallout from COVID plays out, CEO Jilliene Helman is thankful the company’s portfolio is mainly outside of primary markets except for some difficulty in Brooklyn.

“We’ve got a lot of data,” Helman says. “In general, we’re in the mid 90’s with collections across the portfolio. We were 98% pre-COVID, and we’re running at about 95 or 96 on a blended basis across all of our apartments. Brooklyn is the outlier, and it has remained the outlier.”

Helman says the Texas market is holding up well. “Our largest collection of apartments are in the Southeast, and we’re finding that it is holding up well,” she says. “We have some problems here and there, but people have been able to pay rent and hold on.”

Like many in the apartment business, Helman has been surprised with the resiliency of her portfolio. “We have a mix of Class B assets and Class C-plus assets,” she says. “The C-plus assets are having a harder time than [the people in] the B and B-plus assets.”

When people were getting stimulus checks, Helman says that people in her C assets were actually able to save some money for a little while.

“They were able to save up because their rent is cheaper and their cost of living is cheaper,” she says. “We saw that float through for a couple of months post-stimulus.”

But then, as the job losses grew, some residents in her Class C communities faced struggles. One Irving, Texas community stands out to Helman. “Irving is an easy commute to the airport, where a lot of our tenant base worked,” Helman says. “They were actually physically working in the airport, handling baggage or doing concessions. A lot of those jobs dried up.”

Helman sees residents of Class C apartments struggling in other areas, as well.

“We own two other assets in El Paso, and they are on different sides of the city,” Helman says. “One is a wealthier demographic, and the other is a less wealthy demographic. Not surprisingly, for the less wealthy demographic, our collections are at 92%. For the wealthier demographic, they’re 97%. So you do have some differences depending on if it’s a C-plus asset or a B asset.”

Helman thinks these people desperately need more stimulus funds. “We need more stimulus because I don’t think that people can hold on forever here,” she says.

The good news is Congress appears close to passing a deal new complete with stimulus checks

“If we don’t see another stimulus package by Q1, I think that we’re, we’re going to start seeing a dip in collections,” she says.