MBA’s CREF21: What’s Changing in Multifamily
- Feb 05, 2021
The apartment sector has been less impacted by the pandemic than other property types. Despite a bump up in occupancies and a dip in rents, there was relative optimism among multifamily finance, investment and servicing professionals at the annual Mortgage Bankers Association CREF21.
“Investors are taking a long-term view on multifamily, and we haven’t seen declines in value thus far,” said Debby Jenkins, executive vice president and head of Multifamily for Freddie Mac.
Nevertheless, the industry has shifted in a number of ways since since the conference’s attendees met last year in San Diego. Here are some of the major changes and challenges discussed by lenders, investors and servicers at this year’s virtual CREF conference.
Diversity, Equity & Inclusion
The push for greater diversity, equity and inclusion is influencing every aspect of corporate America and the housing business, and that was reflected throughout the conference’s content.
MBA chair Susan Stewart opened the conference by announcing that expanding minority home ownership and affordable multifamily housing is her goal for the year because, she said, it was the “single” best way to combat injustice and build strong communities. (President Biden is also calling for greater equity in housing.)
Civil rights icon Andrew Young, while keynoting the second day of the program, spoke of the economic benefits of diversity. “Atlanta grew from less than a million while I was mayor to 6 or 7 million today, and basically all it did was include minorities and women in the equation,” said Young.
Prior to 2020, the real estate industry was coming to a consensus that it had a diversity problem among its ranks. But, following the killing of George Floyd last year and the national outcry that followed, more companies and trade groups have made it a focus, and larger companies that have typically led in this area have stepped up their commitments.
PGIM Real Estate, for example, is enhancing its diversity efforts in four areas– talent, investment processes, industry participation and community engagement, according to Joni Brown-Haas, head of Real Estate Loan Services for PGIM Real Estate.
“Like others, this was a reminder that we can and should do more,” she said.
The Move to the Suburbs
Another recurring theme throughout the conference was the firming up of suburban apartment markets at the expense of urban cores.
Millennials were beginning to move to the suburbs even prior to COVID. But the pandemic accelerated the trend, causing rents and occupancies in urban cores to lag. Cities are expected to rebound, but not until vaccine distribution is more widespread and the things that make spending more for an urban apartment return.
The flight to the suburbs also drove up the price of single-family homes and helping fuel the single-family rental market, which was raised in a number of panel discussions.
Both private and more institutional capital sources are putting dollars behind this alternative property type, while a growing numbers of home builders are signing on to create new supply. “I think that the challenge with that market is just accumulating volume, right, so you know we’re (buying it) through creating ventures with folks that that will get us access to that product,” said Nuveen managing director Jack Gay.
Non-agency lenders are also find opportunities in this property type since Fannie Mae and Freddie Mac do not finance single-family rentals acquisitions, though they may fund a well-organized development plan.
But some financing executives are dubious about the lasting strength and reach of this relative newcomer. “I mean we’re seeing a growing market for sing-family rentals because it does look like a multifamily rental,” said Northmarq CEO Jeff Weidell. “Of course, though, those have to be restricted to areas where housing can be built cheaply–in Arizona, Florida. It’s not going to work in high-cost housing areas.”
It’s a Digital World
With the onset of the pandemic, the multifamily lending business moved completely online, testing the industry’s investments in resilience and underscoring the need for continued innovation.
The heads of multifamily for Fannie Mae and Freddie Mac both credited technology for enabling them to continue serving the multifamily industry during shutdowns and social distancing restrictions. Each had record years in 2020—$76 billion for Fannie Mae and $82.5 billion for Freddie Mac.
Michelle Evans, executive vice president and head of multifamily at Fannie Mae, explained how the agency had been building its technology infrastructure for some time and, when COVID struck, it was rolling out a pricing automation tool and a tool for back office management. But the truly critical piece, she said, was being able to access digital data quickly.
“We’ve got to be in a situation where we are constantly thinking about the data,” said Evans. “Anything we can do to think about the digitization of data is going to allow us to be able to do our jobs better and continue to build our ability to be more resilient in the data.
“It just proved out how important it was that we made those changes, and we continue to make those changes for the future for something else that may come our way.”
Jenkins of Freddie Mac agreed: “We are 45 days from one year of effectively, collectively running the multifamily finance industry from our homes. And that doesn’t get done with the help of technology and some pretty smart people.”
Preserving Human Capital
Technology has allowed professionals to maintain their pipelines during COVID while working from home. The shift to remote, however, has made maintaining corporate culture and morale, particularly for younger team members, difficult.
Developing staff while working remotely was the topic of the conference’s closing session. The panel of loan servicing executives all agreed that the secret sauce for continuity between the office and the virtual office is communication.
To continue developing its talent, Northmarq has stressed “intentional” communication, said Brian Pounds, assistant vice president, Loan Portfolio Management.
“It can’t just be just your standard communication from when we were in the office,” Pounds explained. “It needs to be intentional communication, especially when you are working with young professionals or people who are new in the position.”
Northmarq also adopted the policy of “cameras on” for Zoom and Teams calls to make the exchanges feel more interactive and to enable intimate professional developmental conversations.
Everyone is experiencing the pandemic differently and, for sake of morale, it is important to check in to see what they are doing and how they are doing, according to Jan Sternin, CMB, Berkadia senior vice president and managing director.
“We’re working really hard.” said Sternin. “There’s a lot going on in the servicing business between modifications and borrower requests plus people being remote. People are working a lot of hours. We really have focused from the most senior management on down on staying in touch, staying connected.”
Being remote can offer some unique opportunities as well. Berkadia sent 200 team members to the virtual CREF21 conference.
Panelists also agreed that the at-home workplace does need to be a bit more flexible with parents juggling work, home schooling and other responsibilities.
“If they are good staff people, you’ll be able to keep the productivity going,” said Michael Heagerty, CCMS, principal & CFO, Gantry.