Finance i Ohio

Bellwether's Jeff Musser: It's still busy out there

Bellwether's Jeff Musser: It's still busy out there,ph01

The multifamily market has been strong for a long time. And in a bit of good news? The financing requests for this market sector aren’t slowing soon, according to industry veteran Jeff Musser, vice president of the Cleveland office of Bellwether Enterprise Real Estate Capital.

Midwest Real Estate News recently spoke to Musser about the strength of the multifamily market across the country; the requests for financing for this sector; and what factors lenders consider when debating whether to fund an acquisition or new construction.

Midwest Real Estate News: This is a broad way to start this interview, but how strong is the commercial financing market right now? Are you still getting a lot of requests for commercial financing?

Jeff Musser: It is very busy out there. There is still a lot of capital chasing transactions. We have not seen a slowdown here.

MREN: What type of financing requests have you been seeing?

Musser: It’s a pretty good mix between purchase and development. We are seeing financing requests for a lot of value-add transactions. Owners and investors are seeing the rental increases you can see from buying a stabilized property and adding just a bit of a refresher. Owners and investors are putting money into bedrooms, common areas and kitchens, and then receiving a nice rental boost.

MREN: I know that multifamily has long been a steady source of financing requests. Is that still the case?

Musser: For Bellwether, 50 to 60 percent of the company’s originations are multifamily. That asset class is still a darling and still sought after by all lending types. There is a lot of capital readily available for multifamily.

MREN: What do you look at when determining whether to grant a financing request?

Musser: We look heavily at the property and how it has performed historically with occupancy, rent growth and operating expenses. We look at a property’s competitive advantages and disadvantages compared to the properties with which it competes. We look very heavily at the property itself and the submarket it is in.

And, with all real estate, it is important to look at who the owner/operator is. Real estate is a hands-on business. We look at the track record of the developer. What has that developer been successful at doing in the past?

MREN: How does the state of the market itself impact your financing decisions?

Musser: If we are looking at new development, one of the first questions we’ll look at is what sort of supply is coming online. How is that competitive supply going to affect our property? Are we confident that all the supply will be absorbed in a timely manner? Is that submarket overheated a bit?

Some of the coastal markets and major gateway cities are seeing a lot of new construction. You are starting to see banks there pulling back on leverage. It’s not that they aren’t available for construction financing, but the leverage has been scaled back a bit to protect themselves from new supply coming online.

MREN: Are you concerned at all about oversupply in the multifamily market?

Musser: There probably are some markets that are over-supplied. But even in those markets, it’s more than it is just going to take a little longer to absorb that space. It’s nothing to cause those markets to collapse. Instead, owners might have to extend the lease-up period a bit longer.

Construction costs are increasing. Banks are reducing leverage. Interest rates are increasing. Those three factors put a bit of a governor on supply. Some markets might have a lot of supply, but those three components are helping in terms of controlling the overall new supply across the country. As long as job growth and the economy continues in a positive direction, I don’t see the markets collapsing. Maybe owners won’t get the absolutely highest rents in the market. But I don’t see any cataclysmic returns.

MREN: When it comes to new apartment construction, what amenities are tenants looking for today?

Musser: It depends on the specific market and what is standard in it. It is hard to get all that into just one interview. But pools are still important. People like having pools and clubhouses. They like fitness centers. Having washers and dryers in-unit is incredibly more important today. With the rents we are seeing, it is more important to have the washer and dryer units in the apartment units themselves. That is becoming the norm in a lot of markets.

Having nice fixtures is important, as is having efficient layouts. Many of the newer apartments are catering to pets. They might have a dog park or a dog-washing station. Bike rooms are becoming more popular, too.