How One Multifamily Firm Is Navigating the Market’s Challenges

For all the challenges currently found in the residential market, Adam Perry, senior vice president, development and construction, at Cityview, says he’s nonetheless pleased to be focused completely on multifamily. 

“I’m very glad I don’t work in the office sector. We’ve had bumps every 4 or 5 years, due to cost escalation, but it’s been relatively stable,” says Perry, who will be speaking on a panel entitled ‘Lessons From the Trenches: The Full Scope of Multifamily Development‘ on October 17 as part of GlobeSt’s Multifamily Fall 2023 conference in Los Angeles.

The situation is more complex lately, however. “We’ve got a triple threat going on right now. The Fed has raised interest rates, creating pressure. It’s challenging working with the capital markets with interest rates up so significantly and cap rates also expanding. which means values go down,” he says.  

To add to it, financing costs which shot up during the pandemic have not yet stabilized. “Underwriting has changed significantly. Costs have increased, and we’ve expanded our cap rates out. We’ve had to underwrite much more debt for the financing, making it a lot more challenging to get deals done,” Perry adds.

It’s not impossible, however, he points out. Cityview recently broke ground on a 265-unit project in Los Angeles’ South Bay.

“We went to several institutions on the debt and got a handful of terms sheets. A year ago, we probably would have only received five or fewer term sheets, so that indicates where the debt markets are. Financing is now taking longer, closing in two to three months,” he says.  

A key means of survival in the face of market difficulties is agility, he believes, as well as solidifying existing relationships. “One of our values is to be agile and we’re being as agile as possible with every opportunity and every deal,” he says. “Also, relationships are key e.g. with lenders, to get funding and refinancing and getting construction finance – it’s been very challenging. Great relationships with lenders are the most important thing right now.”’

GlobeSt.com is holding its multifamily fall conference on October 16-17 in Los Angeles. For more information visit here.