Morgan Properties on Investment Trends
Senior Vice President of Operations Brent Kohere discusses what's on his radar and the most important thing investors need to be aware of.
With more than three decades of experience in the multifamily real estate industry, Brent Kohere serves as senior vice president of operations for King of Prussia, Pa.-based Morgan Properties, responsible for growing the company’s portfolio through management operations, marketing, leasing and training for both wholly owned and joint-venture assets.
A national real estate investment and management company, Morgan Properties’ primary footprint is in the high barrier to entry markets of the Northeast and Mid-Atlantic. It currently owns and manages a multifamily portfolio comprised of 150 apartment communities and more than 45,000 units located in 10 states, making it the 20th largest apartment owner in the U.S.
“We are lucky to have product in strong areas where we can invest for more than just asset preservation and end of useful life needs,” Kohere said. “We see strong returns for both in-unit and common area/amenity upgrades when we do them.”
Morgan Properties’ $95 million acquisition of the 806-unit Carriage Hill Village in Randallstown, Md., was the metro’s largest multifamily transaction in the year for the first quarter, according to Yardi Matrix.
Kohere recently took some time to talk to MHN about what he’s seeing in the market.
With the first half of 2018 behind us, what are the trends you’ve seen in the multifamily investment market?
Kohere: Deal pricing remains high, and somewhat less attractive (to us at least) given that financing is higher than in the previous year. Accordingly, we have been more selective in the transactions we pursue.
What’s happening in the sectors you follow? What’s on your radar and why?
Kohere: There are a lot of players in the value-add space, and many are doing creative and full-blown makeovers. We have taken a more selective approach to our value-add strategies and look for a more tangible and measurable return on investment that a specific strategy can deliver rather than a full-blown “touch many components” approach. Given that deal pricing remains high (particularly in our current footprint), we have a willingness to pursue deals in new markets provided we can get in at some degree of scale, and by scale we mean purchasing large size properties or portfolios. Our business plan is to continue growing and that in and of itself will likely require us to expand our footprint.
What do you feel is the most important thing that investors need to be aware of in today’s multifamily environment?
Kohere: Interest rates from the transaction perspective, but more specifically in our world of value-add repositioning and enhancement of existing product, means knowing what is behind closed doors when we are in the acquisition phase. Useful life of the capital components is very important and has real down-the-line impact on cash needs. A perfect example is the switch of HVAC refrigerant. Most of the product we look at has R22 equipment which is being rendered obsolete with the introduction of 410A type equipment, not to mention the need to also address “in the wall lines,” which like the equipment itself, are not compatible with the new refrigerant.
What’s your biggest piece of advice with today’s current market?
Kohere: Don’t stray from fundamentals and remember we have become more of a service-based industry. While in our space there is a need to upgrade apartments and amenities to create value, never underestimate the value derived from simply providing an exceptional resident experience through our interactions. It is as important as the product.
What’s the key to planning a successful strategy?
Kohere: For us it is staying with our fundamentals and “sticking to our knitting” while being open to how new ideas can fit into our proven programs.
Anything surprising to you about 2018 so far?
Kohere: Technology is advancing rapidly whether it be in business intelligence and machine learning AI, or the introduction of the “smart apartment” with IoT connected devices. Relative to the smart apartment. many companies are bringing various products to market that play well in other environments like single-family homes, vacation rentals, and hotels. The key is finding a platform to manage those components in a manner that works well in the multifamily rental environment. We are piloting a few and recognize that we need to be on this wave.
