A Forum With Emphasis on Multifamily

Carmel Partners Chief Executive Ron Zeff and Marcus & Millichap Inc. Chief Executive Hessam Nadji served as keynote speakers at Marcus & Millichap/IPA Multifamily Forum: Southern California. The event was held June 6 at the Los Angeles Grand Hotel in downtown L.A. Among the industry leaders and experts spotted at the multifamily specializing brokerage’s event — Tom Bannon, Yuval Bar-Zemer, Ash Baraghoush, Gidi Cohen, Paul Daneshrad. M&M First Vice President Enrique Wong told some 300 people that his firm saw 9,000 deals close in 2018, totaling $6.5 billion in transactions and 1,700 loan originations. John Sebree, national director of Calabasas-headquartered Marcus & Millichap, lectured about the state of multifamily, locally and nationally. This year, 318,000 new units were created nationally with 4.5 percent vacancy. Los Angeles is the No. 3 market for new units, behind New York and Dallas-Fort Worth. Consumer confidence remains level since the Great Recession-fueled drop of 2008 through 2010, with a small dip during the 2016 election cycle, he said. Sebree broke down how investors are diversifying their portfolios beyond multifamily to include self-storage and shopping centers. However, housing construction has fallen short. Whereas 2000 to 2007 saw an oversupply of demand, 2008 through 2019 witnessed undersupply of 1.9 million units. “Supply is not equaling demand,” Sebree said. As it turns out, the only substantial affordable units since Los Angeles voters approved of the $1.2 billion Proposition HHH housing bond in November 2016 have been erected in the Valley. However, it took two years, six months and 24 days for the first such HHH housing to go online May 31 in the form of just 49 units of permanent supportive housing and 250 temporary shelter beds in Sun Valley. That breaks down into 935 days to house about 300 people at a cost of $52 million in the face of an L.A. County homeless problem that, as of June, has totaled 59,936 people, according to 2019’s Greater Los Angeles Homeless Count, which noted increases of 12 percent and 16 percent in the county and city of Los Angeles, respectively. Nevertheless, Sebree said, the market prefers class A luxury units. “You know the old joke? You build class C and you wait 30 years!” Sebree said. Later in a conversation with moderator and institutional property advisor Stan Jones, Zeff underscored how development yield (20 to 30 percent) is sexier than value-add yield (15 to 20 percent). “As you know, value-add is the lowest cap rate today,” Zeff said. “That’s a game we wouldn’t play.” When Jones asked Zeff to predict when the next recession may hit, he quipped with a shrug: “Every day that goes on, we are closer to a recession.”