Mission Rock Residential on Managing Growth
- Aug 24, 2017
Denver-based Mission Rock Residential offers multifamily owners a range of services, implementing policies and procedures, metrics, systems, management structures, compensation systems, use of technology and effective training since 2012, in order to create a strong and consistent operating discipline. Multi-Housing News talked to Patricia Hutchison, Mission Rock’s president, about the company’s beginnings, today’s multifamily landscape, the lending market and the effects of rising interest rates.
MHN: How did it all get started? How many employees did you have in the beginning?
Patricia Hutchison: It started through Hamilton Zanze, a real estate investment firm based in San Francisco. At the time (2012), they had approximately 70 assets being managed by different management companies around the country. Although Mission Rock is an independent company (stand-alone), we began with just one client (Hamilton Zanze), and five employees. We have since grown to manage more than 24,000 units with a staff of more than 650 employees. Mission Rock now manages for multiple third-party owners, and maintains properties in 10 states.
MHN: How many multifamily properties do you currently have under management?
MHN: What do you feel is the most important thing that investors need to be aware of in today’s multifamily environment?
Hutchison: I would say that interest rates have an outsized influence on multifamily development right now. Since the Presidential election, cap rates have continued to decline or stabilize in most markets. Additionally, rental growth has been starting to cool in the hottest markets, so investor returns have become even more sensitive interest rate movement.
Although we are still at historic lows, generally speaking, rates have risen between 50 and 100 basis points—which is equivalent to a 20-30 percent increase depending on the benchmark—since the election, however cap rates have not risen accordingly. This lack of cap rate expansion coupled with a rise in rates has squeezed distributable cash flow for investors.
MHN: How do you see the multifamily lending market today in terms of trends and challenges?
Hutchison: Financing for multifamily properties is readily available in the present market. Overall loan volume is down from 2016, but that is not a function of limited availability of loan dollars or underwriting. It is a function of limited amount of multifamily properties currently available for sale. Many owners accelerated their planned property sales into 2016 in anticipation of interest rates rising and a corresponding decrease in values. Rates have stayed relatively low and demand from buyers is strong.
The combination of limited properties for sale and abundant capital has created a competitive market with most deals commanding nonrefundable deposits to win deals. Although buyers have remained more disciplined than before the recession, cap rates have compressed somewhat. Nevertheless, agency and CMBS debt underwriting is readily available up to 70 percent loan-to-value assuming 1.25x DCR with reasonable underwriting.
MHN: In the last five years, you have reached roughly 25,000 units under management. What differentiates your firm from other property management companies?
Hutchison: What differentiates Mission Rock is our performance, our culture and the mentality of “thinking like owners.” There is a proven track record of success in each region, and our results in maximizing the return on each investment. Mission Rock is a transparent organization, with accountability and integrity—and the culture is extremely unique.
MHN: How have things changed since you were awarded the AMO accreditation?
Hutchison: It has given our young company more credibility to our clients. It has ensured we are utilizing IREM Best Practices consistently. Our team members have a sense of pride and prestige to have this designation.
Image courtesy of Mission Rock Residential