GlobeSt Conference Speakers Find Little to Dislike About Multifamily Finance

LOS ANGELES—There was little dissent among speakers at the GlobeSt. Multifamily conference here on one particular subject: finance and its availability. To a person, the agreement was multifamily finance has had a great record year. 

For Cade Vander Broek, managing director of the west coast at Money360, his firm has not seen a slowdown. “We are at full throttle,” he said. “We are really heavy on multifamily versus other product types. Deal flow is extremely strong right now.”

Jeff Burns, a managing director at Walker & Dunlop, said that this year, compared to the last six or seven years, his team has done more non-agency financing through some of bridge lenders. “There is so much capital chasing so few deals.”

Cody Charfauros, principal and managing director at Slatt Capital, agreed, noting that his firm has had their biggest year ever and are “drinking from the fire hose right now.”

The multifamily sector has been a beneficiary of the pandemic, there is no doubt about that, explained speaker James D’Argenio, senior principal of acquisitions at the Bascom Group. That is thanks to the availability of credit, he said. “Agencies stepped up and were there to facilitate transactions… It has been an exciting year that I did not predict.”

Moderator Jeff Erxleben, EVP and executive managing director of NorthMarq, said that from a user or borrower of capital, there are plenty of options and Bobby Khorshidi, president of Archway Capital, said that on the equity side, his company is seeing spreads shrink more and more. “For us, the debt deals make a lot more sense than the equity deals.”

He added that his firm is also seeing a lot of hotel conversions to multifamily as well as office buildings convert to multifamily. One of the challenges with that though is that it is really market specific, he said. You have to know how a bunch of studio apartments will be received, he said. “At the end of the day, what is attractive about it is affordability. It provides an affordable housing option and could be a good play.”

Charfauros said that people are looking for that value add opportunity but “I think that the price adjustment and bid ask spread on those is just starting now.”

Vander Broek said his firm is getting more comfortable in terms of hotel to multifamily conversion, especially the suite style conversions that can possibly get a two-bedroom out of that play as opposed to a studio. “To the extent that we have seen, where they will be all studios…that is a harder sell in our shop.”

D’Argenio does note that the concept of converting an old hotel into apartments is a good concept, but sometimes they don’t really pencil. “One has to wonder if we are engineering these new ideas to come up with something we want to pull off. Are we drifting into other microsectors to make it execute? That can be dangerous.”

Vander Broek also said that people from other markets who can’t get a value-add deal, say in California, for example, are now looking at a hotel deal in Texas. “They are moving into things they have never done in places they have never been,” he said. “They are getting out over their skis a little bit looking for deals.”