In an interview with Multifamily Dive about distress in multifamily, Kingbird’s Chief Investment Officer, Vincent DiSalvo, explains why concerns are overblown. Even though apartment owners with maturing loans will face higher interest rates and a decline in property values, he points to several reasons to be optimistic.
Pricing and demand have an inverse relationship, all else being equal; as costs rise, demand falls. This has been especially true in the construction sector. Since 2017, costs associated with building new housing rose faster than general inflation, as shown in Exhibit 9. These dynamics limit the ability of developers to construct moderately priced product. Increased costs can also halt new construction altogether, on occasion, as projects become unprofitable to continue.
Amidst rising interest rates, high inflation, and broader economic uncertainty – there is no shortage of doom and gloom headlines when it comes to CRE investment. Recent apartment vacancies piling up in certain geographies and sectors of the multifamily market have created a shift in media sentiment and headlines that multifamily has been immune to over the last few years. As headlines continue to simplify the narrative, our research continues to illustrate that the underlying demographic fundamentals and demand drivers remain compelling. Multifamily and related rental housing investment is a long game – and it’s critical to stay focused on the structural and secular factors that form the basis for a durable long-term investment program in the sector.
Rising interest rates, a potential policy-induced recession, credit terms, and valuation uncertainties are all a reality, but the current “doom and gloom” headlines oversimplify and obscure the long-term positive fundamentals of the multifamily asset class specifically. Ken Munkacy talked to GlobeSt about Kingbird’s research and analysis that shows the underlying fundamentals in the multifamily asset class – especially workforce housing – remain solid, and investing in distress as 2023 unfolds presents an opportunity to capture strong risk-adjusted returns.
Ken Munkacy spoke to Samantha Rowan at Real Capital USA about the glimmers of mispriced risk and the opportunity to provide growth capital to operators who need to fill in gaps in the capital stack.
Global direct investment in real estate fell for the first time on a quarterly, annual basis since the onset of the pandemic, according to a report this week from JLL. Vince DiSalvo spoke to GlobeSt about how real estate values, like valuations across all asset classes, will continue to be put into question as the Fed determines its policy guidance going forward. While investors are wise to remain cautious, Vince acknowledges real estate is special because it is both a cash flow series and a hard asset.
