MHN Interview: Mission Capital Advisors on Multifamily Institutional Investors
By Jessica Fiur, News Editor
New York—Mission Capital Advisors’ Debt and Finance Group, a New York-based organization, recently added Brad Lyons and Rob Beyer as directors. MHN speaks to Lyons and Beyer about current trends regarding institutional investors in multifamily.
MHN: What are your priorities in your new position?
Lyons: Mission helps clients capitalize their projects. I am responsible for business development and execution of debt and equity assignments nationally. Our primary goal is to ensure that we achieve the best possible execution for our clients on everything from debt and equity structuring, to proceeds, pricing and covenants. We deliver liquidity and transparency to our clients’ projects.
Beyer: I will be responsible for originating debt and equity assignments from real estate owners and developers across the country. I have a strong background in hotels, but have also been an attorney for a real estate investment company that owns hotels, apartments, office, industrial, retail and gas stations, so my focus will be broad-based.
MHN: What are some of the trends you’re seeing now regarding institutional investors, particularly in multifamily?
Beyer: There’s a lot of liquidity in the marketplace right now, and there are not quite enough deals to go around. In the multifamily space, because there is so much capital in the marketplace, cap rates are being driven down to very low levels. With interest rates so low, this trend will probably continue until the federal government takes some action to reverse this. This is happening not just in the multifamily space, but it’s happening in every asset class. However, because there’s even more liquidity in multifamily and the historical stability of multifamily, it’s more prevalent in that asset class.
Lyons: We continue to see strong demand from institutional investors for multifamily assets. Demand is coming from the REITS, pension funds and high net worth families, as well as smaller private investors and local operators who are frequently capitalized by institutional investors. Yield compression in primary markets is pushing many institutional investors into secondary and tertiary markets where multifamily assets are now being snapped up very quickly. This is a win/win for all parties involved.
MHN: Do you think this will continue?
Lyons: We expect this trend to continue as institutional investors seek the liquidity characteristics of multifamily assets relative to other alternative asset classes, with embedded inflationary protection due to short term leases for long-term holders. Institutional investors also recognize that echo boomers who were starting their careers during the downturn are now extremely reluctant to buy a home and will remain renters for a very long time.
MHN: What are some of the challenges you see?
Lyons: The only real challenge in the multifamily sector at the institutional level would be in the case of an unexpected macro-economic shock or dramatically higher unemployment, which our clients don’t see happening in the foreseeable future.
Beyer: I think that there is still some hesitancy on behalf of some investors because they’re not quite sure what’s going to happen with the economy. People might be a little skittish—people have to put money out, but at the same time they don’t know what the future is going to hold, and everyone is a little more afraid of the accuracy of their crystal ball than they might have been in the past.
MHN: Is there anything you’d like to add?
Lyons: The multifamily sector represents a significant part of our business, and we have been very active raising capital for owners and operators as well as developers, in the multifamily space.
Beyer: At Mission, we are excited about the opportunity to grow the Debt and Equity Finance Group and reach the same level of prominence that our industry-leading loan sale advisory practice has reached. We believe the reputation that Mission has earned, the infrastructure that it has in place, and the current state of the capital markets will allow us to do this in short order.