Executive Insight: Bob Faith, Greystar
The firm's CEO talks investment strategy, highlights of 2016 and the outlook for 2017.
As chairman & CEO of Greystar, Bob Faith oversees the firm’s investment, property management and development businesses. The Charleston, S.C.-based company was named the largest multifamily property manager for the sixth year in a row by the National Multifamily Housing Council and ranks No. 2 overall on the 2016 CPE/MHN index of commercial and multifamily property management companies.
Greystar manages an institutional investment portfolio valued at more than $14 billion, including a $6.9 billion development pipeline. The firm’s management portfolio comprises more than 400,000 units in 160-plus markets worldwide. Last month, Greystar and an affiliate of Macquarie Group announced plans to form a joint venture to raise institutional capital to acquire, develop, reposition and manage rental residential assets in the Asia-Pacific region.
In a recent wide-ranging conversation with MHN, Faith took time to discuss the market’s prospects for 2017, highlights of 2016 and company strategy.
MHN: As the year comes to a close, how would you characterize 2016 as far as multifamily investment opportunities?
Faith: Despite some deceleration in growth, rents continued to outpace inflation and altogether 2016 has been another strong year for multifamily investment. At Greystar, we continued to make strategic investments that align with the strategies we have communicated we would execute on with our capital partners.
MHN: What has been the year’s biggest surprise so far?
Faith: We think one of the largest surprises to industry participants has been how quickly operating performance softened in top markets like San Francisco and New York City this year. With our vast presence and boots-on-the-ground approach, we saw the trends happening (in) real time and think we’ve accommodated well, however.
Also, it’s been interesting to see the development financing market tighten. While the legislation that caused some of this was known, we think the market didn’t expect to experience a tightening to the extent that we have. Thankfully, we believe we’ll be a net benefactor of this phenomenon, given that lenders will likely choose to work with only the well-capitalized, largest developers, while at the same time this should keep supply suppressed in years to come.
We continue to see technology disrupt the multifamily sector. To ensure we are well positioned to take advantage of the many opportunities that technology presents, we invested in a San Francisco-based startup firm called Urbandoor, an online marketplace intended to directly connect users of corporate housing with owners of real estate. It’s important for us to be leaders driving the industry forward with fresh ideas and innovation.
MHN: What major trends are on your radar in the next 12 months that will affect multifamily investing?
Faith: We are laser-focused on monitoring where yields are now and where we think they could be going. A lot of the third-party data forecasters have cut near- term forecasts so we would expect that investors may require higher yields to meet their total return requirements. On the flip side, however, interest from foreign capital continues to grow, and maybe this (will) offset the increase we would otherwise expect, keeping things steady into the foreseeable future.
Another trend that should be interesting is on housing affordability and seeing the products that developers will test-drive (e.g., micro units) to find viable alternatives that create more affordable options while still making their deals pencil.
MHN: What do you feel is the most important thing that investors need to be aware of in today’s multifamily environment?
Faith: It’s clear that there is an ongoing trend of the institutionalization of ownership and consolidation in the residential real estate industry, not just in the US but around the globe. I think that Greystar has continued to be a leader in providing the very best services to all of its residents. Since U.S. trends typically spread globally, we are finding that our strategy of national reach (combined with) local execution, which takes into account the unique demands of every single market, has created a business model for us that really works. We’ve been able to continue growing in the U.S. as well as wherever our clients take us around the globe.
MHN: What do you foresee in 2017? What can we expect about the year ahead?
Faith: Going into 2017, our outlook on the multifamily sector remains strong, driven by what we believe is an unprecedented backdrop of healthy demand for multifamily rentals. We think we should experience a peak of supply deliveries in 2017. With the additional supply coming online we could experience some additional softness, but we expect demand to continue to absorb this, and once it’s through, we could see a similar—albeit not to the same extent—re-acceleration (like) what occurred after growth slowed in 2013. Perhaps most important to us, however, is continuing to cultivate talent within the organization, with the belief that an evergreen business model provides stability and creates an attractive place for talented professionals to learn and grow.