We are still bullish on multifamily, affordable housing, and residential projects when they are priced correctly, and we are buying with a margin of safety (hard to find). We are still bullish on the property type due to a supply/demand imbalance with users and physical spaces (i.e., there is not enough housing to satisfy the number of housing units demanded). Rising demand against a supply that is growing less quickly and not nearly at a rate to absorb that demand should push rental rates higher. However, the capital demand for these properties is also at a historical all-time high, pushing asset prices through the roof. Although many justify overpaying for these assets because of the physical supply/demand imbalance, the rate at which the capital markets have pursued these assets has pushed values too high to take advantage of the physical supply/demand imbalance. At the prices investors are willing to pay for multifamily, the financial risk involved outweighs the
opportunity to exploit the physical supply/demand imbalance. In other words, at these prices, the risks often outweigh the returns. We are tracking the Green Street Property Price Index, and although prices seem to have flattened and
even declined slightly, they are still at levels that are much higher than the pre-pandemic levels we were accustomed to. While we will continue to evaluate on-market and off-market multifamily properties for acquisition, the
The Green Street Commercial Property Price Index ® declined by 1.2% in May. The all-property index is now down 1% since the start of the year. PRICES SLIP FROM HIGHS
24 :: INVESTOR REVIEW :: NOV-DEC 2022
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