Steve Canty is a Director at GRS | Corteq
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Commercial real estate’s multifamily sector remains hot, and GRS | Corteq was recently involved in a deal that exemplifies the strength the asset class sustains. The firm provided multiple due diligence services, including environmental assessments, property condition reports and zoning, for client Greystone, which purchased $125 million in apartments, totaling 1,500 units, located in Nevada, North Carolina, Michigan and Florida. We spoke with Steve Canty, a GRS Group business development director involved in the deal about the transaction and how the multifamily sector is doing overall.
Multifamily is obviously not slowing with this series of deals. Will multifamily continue to remain hot, or is there a bubble happening?
The one thing that has been solid, even throughout the downturn in 2009 when the CMBS market crashed, was that Freddie Mac and Fannie Mae multifamily deals have always performed well. There are small slowdowns in the market with them, but they are not as susceptible to the volatility to the retail and other commercial offerings in the CMBS world. There is always a need for it, and it’s always going to be a solid product.
You did this over several states, and some of them have had problems in the recession. Do you see a bounce back in some of those locales.
Yes. Even though there was a downturn in several of those states, a lot of that came from the residential single-family market and not the commercial multifamily market. A lot of people who were losing their homes had to go to apartment complexes as a result of what happened. Even though there was a downturn in those states overall, it wasn’t that big of an impact. And they’re really coming back. Right now the market is as hot as its been since prior to the recession.
And it doesn’t seem that new-home construction isn’t making that much of a consistent rebound, which is good for multifamily?
The new builds are not climbing at a really high rate. It’s been pretty flat, and it’s still low compared to what it’s done. That’s good for multifamily. There are not a lot of new builds, just refis, or a change of ownership. That trend will continue in the near future for the next few years.
Are these multi-state deals a more complicated for you to do business as opposed to just a single locality?
There’s definitely a different challenge locally, from state to state, or even city to city within the state. That’s why our model is so nice because we have people in every single city that are qualified to do various things. It makes things easier, but it’s more of a challenge, because in North Carolina, for example, you may need an engineer to do a property condition report, but you wouldn’t need that in, say, Michigan or Florida. But in Florida, if you were doing radon testing, you would need a license person to do the radon testing, but you wouldn’t need that in North Carolina. There is definitely a lot going on and you have to be in tune with the portfolios when you’re setting these up with different needs in different local areas.
So your Global Services Connection is what sets you apart in these situations?
Correct, and the nice part about that is if we get engaged to do zoning reports or ALTA surveys, where most groups just do property conditions, we can align the data within those reports to the underwriters, and the lending agencies don’t have to figure out, for example, of one report says there are 100 parking spaces and another one says there are 105. It’s a lot of time saved for the underwriters.
So this deal ended up working out with much problem?
The deal went very smoothly from beginning to end. It was great to work with this client because they really know how to set up portfolio-type deals. We had a lot of good communication with our guys in the field and sent the client solid products that they were pleased with in the end.
How do you see the sector playing out over the next year?
Multifamily will continue to grow in 2015. Small loan and small balance stuff will be really strong, especially with Freddie Mac’s new small-balance program they just rolled out, so there will be a lot of activity in 2015. And we’re right on top of this new Freddie Mac program–having been servicing its transactions since the day it launched.