Multifamily owners and operators have been put to the test like never before due to the pandemic-induced economic fallout. However, some players saw opportunity where most saw uncertainty. Pegasus Residential recently announced it would expand into new markets like Denver, Phoenix and Salt Lake City, with the company already managing more than 33,000 units across 40 markets.
To find out what attracted them to these Western markets and how they tackle challenges surrounding leasing and lease-ups in the current conditions, Multi-Housing News talked to Vice President of Business Development Laurie Lyons. As a 30-year industry veteran, Lyons has not only learned how to navigate through storms but also to identify the best opportunities in fragile economic environments.
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What attracted you to Denver, Phoenix and Salt Lake City? Why did you pick these particular markets to expand in?
Lyons: The answer is two-fold. To start with, these are strong apartment markets. People want to live in these metros and their populations are growing. Rents are increasing and developers are building new properties. We’ve had great success with lease-ups and lease-ups are definitely one of our focal points at Pegasus. So, we believe we can be very successful in these markets. Secondly, we have existing owner clients that are seeking opportunities in these markets and we want to be able to go there with them.
You’ve announced this expansion in the middle of a pandemic. Why is this the right time to expand?
Lyons: We feel good about the long-term health of the Denver, Phoenix and Salt Lake City markets, and we feel great about the health of our company. We have long been committed to embracing technology and innovation—we had self-guided tours in place before the pandemic, for example—and this makes us nimble and ready to navigate any market condition.
We believe this is a time when other operators might not be ready to enter new markets and so, in many ways, it makes sense to expand now, when other companies might not be able to do so.How difficult has it been to maintain contact with all your clients since the onset of the health crisis?
Lyons: It has not been difficult. In fact, some of our clients have actually told us we were overcommunicating, which is not the worst problem to have.
At the start of the pandemic, we decided to do separate weekly calls with each of our clients because COVID-19 had created an environment where everything was changing on a weekly basis. During these calls, we talk with them about issues we are anticipating and already seeing, and how we are responding. We want to make sure our investors are heard and listened to, and that we get a chance to propose things to them that we think would be helpful during this period.
Even before the pandemic, we had a client portal that gives our property owners around-the-clock access to real-time information about their communities. After the pandemic started, we also created a mobile app that gives them access to the same information and allows them to communicate with us quickly and easily.
How did you approach difficult situations when it comes to collecting rents at properties you manage?
Lyons: Throughout the pandemic, our leadership team has been meeting on a regular basis to hear from our regions about the issues and challenges they are having with rent payments and delinquencies. We’ve had some properties that have never skipped a beat in terms of collecting rent and then we’ve had some where residents have suffered because of the pandemic and the economy.
We’ve used the insight, experience and synergy of all our markets to discuss and formulate solutions. With properties that were facing significant issues, we got the owners involved quickly so they could really understand what was happening and so we could get approvals from them, if necessary, on things like rent deferments.
At the site level, we’ve also worked with state and local jurisdictions to put together information for residents about services that are available to those who are struggling because of the pandemic. We’ve set people up on payment plans and done everything we can think of to help our residents out and be fair to them.
What are the top three challenges surrounding leasing and lease-ups in the multifamily business?
Lyons: I’d say the biggest challenge is having qualified and trained sales staff that can also adapt to the new environment, where we’re integrating a high level of technology.
Next, because of the construction delays during the pandemic, a lot of communities are being delivered later than planned and some of them are being delivered at a time of year when leasing is traditionally a challenge. So that’s another.
And then the third concerns the moving patterns we’ve seen during the pandemic. People have really fled the crowded, major cities. I call it taking shelter from COVID-19. They’ve moved to more suburban areas and smaller towns. Some people call these quieter areas “Zoom towns.” If you can do a Zoom call for work from there, you’re going to move there and stay there.
So depending on where an existing property or a new development is, it could be experiencing unexpected levels of demand. You could be way outperforming because you hadn’t anticipated that level of demand or, if you’re in a major city, your lease-up could be stagnant.Are you planning to expand your operations in other Western metros as well?
Lyons: We’re focusing on Denver, Phoenix and Salt Lake City, and we’re not considering any other new Western metros at this time. We already have a presence in Texas, which has always been and always will be a renter’s haven. If you look in the Northwest, you see rent controls and restrictions. So that’s kind of slowed new development.
And then California is a really unique and challenging market. It’s definitely its own kind of thing. If you’re going to be in California, you need to have a big presence there. As for Las Vegas, the rents are pretty low there, so it makes it difficult to develop new properties and lease-ups are big for us.
What are your predictions for the multifamily industry in 2021?
Lyons: Assuming the vaccinations are rolled out and things go well with that, I think life is going to begin returning to normal.
I predict we’ll see a strong demand for rental housing. Some renters will prefer single-family rentals because of ongoing COVID-19 concerns. Some people will want a place with a backyard and private areas where they’re not exposed to as many people. And some multifamily developers will move toward smaller properties with townhome layouts to appeal to residents who might not want to live in a big 300-unit property where the apartments are so close together—again, because of health concerns.
But there should be strong demand for all types of rental housing because during and after an economic crisis and a period of high unemployment, many people aren’t positioned to buy a home. Their savings have been depleted. We are more of a renter’s nation right now.