Interview: USAA’s Managing Director of Multifamily Development

When it comes to all things dealing with multifamily investments at USAA Real Estate Company, Hailey Ghalib, the company’s managing director of multifamily development & portfolio manager of multifamily, is involved in pretty much every facet of the segment.

Over the past decade, Ghalib has helped lead the San Antonio, Texas-headquartered firm to be a leader in the industry. Here she speaks with MHN about what she’s seeing in the current marketplace.

MHN: Now that we’ve passed the halfway point of 2016, how would you characterize the state of investment activity in multifamily today?

Ghalib: We’re not seeing any deterioration in fundamentals; 2015 exceeded everyone’s expectations with over projected rent growth at 4.7 percent at a per-property basis in our portfolio, and we see fundamentals are still pretty strong. We expect more of the same for the rest of 2016. The demand is still pretty robust for high-quality, well-located multifamily product. Our team takes a very disciplined approach in underwriting so we’ve moderated all expectations and rent growth for a year or two now. We’re pleasantly surprised with the continued strong performance above expectations. We don’t see that necessarily changing, but any conversations like that need to happen on a granular level, almost on a submarket-by-submarket basis.

MHN: How has your investment strategy changed and to what extent has multifamily fit into your philosophy?

Ghalib: For us, multifamily continues to be a high-target portfolio-wise and it’s a product type we’d like to have an ownership in and maintain a presence in long-term. We like the efficient cash flow, the stability of the space, the five-year compounded rent growth is consistently positive and the strong long-term demand drivers make it an ideal product.

MHN: Are there hot areas around the country that you’re keeping an eye on that you think will be strong investment locations over the course of the next year or so?

Ghalib: Our team takes a very methodically approach—a top down and bottom up approach—analyzing 62 or more target premium submarkets across the United States, and we monitor them pretty closely and that helps us inform where our focus should be. Similarly, we utilize a grassroots approach as well based on our knowledge of the local markets. That informs our strategy and investment focus. I think there are some markets emerging, such as within the Bay Area, San Francisco rents have increased significantly and Oakland has emerged as a viable alternative; there’s a lot of gentrification and evolution there. We’ve entered the Oakland/Rockridge area in a transit-oriented development and the value proposition is you’re conveniently accessible to San Francisco but your rents are meaningfully lower.

MHN: How does this being an election year affect the multifamily market if at all?

Ghalib: From our perspective, we’re not visibly seeing any impact on the operation or construction.

MHN: What factors then do you think investors should be keeping an eye on? Are there any other trends on your radar in the next 12 months that will affect multifamily investing?

Ghalib: You have to maintain the discipline and take a sober look on expected rent growth. Affordability is a topic of focus for a lot of folks, and we track that pretty closely within our portfolio and monitor the rents as a percentage of monthly income and we are maintaining healthy ratios. We believe multifamily continues to offer compelling long-term, risk-adjusted returns. We like the space quite a bit and see it as a significant component of our long-term portfolio.