Evan Katzin is a Director of the Real Estate Investment Group at Alliance Bernstein. He’ll be a panelist at the upcoming Connect Apartments 2023 event in Key Biscayne, Florida. ConnectCRE.com contacted Evan to give us a little preview about what is on his mind leading up to the event.
With traditional lending options drying up due to rising rates, might multifamily investors instead move over to affordable housing projects where government money and tax credits are more readily available? There is certainly demand for more affordable housing but the availability of government money and tax credits is somewhat nuanced and project specific. We are seeing alternative capital sources such as debt funds and life companies help fill the void which is a theme we anticipate continuing to play out into 2024.
What underwriting criteria are especially important in the current market? What factors are you looking at more closely when considering a loan? From a macro perspective, we are highly focused on base rates impact to value, implied leverage and coverage during our loan term. I think it is safe to say the days of sub-5% caps are over but the question is where does the 10-year stabilize and what is the appropriate normalized spread or risk premium? With respect to underwriting criteria, we are focused on concessions & whether they are transitory or more indicative of true market rents. Other considerations that are top of mind include expense growth & margin pressure, headlined by the dislocation in the insurance market. There are clearly more variables in today’s market which is a major reason why there was significantly less transaction volume this past year.
Looking at the value-add market, are you seeing as many potential lending opportunities in the Southeast as there are in other regions, such as the Northeast? Certainly. While the trends of population & job inflows are somewhat moderating, we believe these markets are still significantly undersupplied. Of late, we have seen a number of build-to-rent opportunities across the Southeast which is largely driven by home builders pivoting to sell in bulk as rental product vs. one-off home sales which is a challenging execution in today’s market.
Don’t miss real-time key insights from multifamily’s leading power players from Florida, the Southeast, Mid-Atlantic and Gulf Coast! Register to attend Connect Apartments 2023 on Nov 29 in Key Biscayne, FL. Click here to register.
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