Sometimes things work the opposite of the way they
should. Now, for instance. If apartment finance worked as
it should, lenders' and
investors' money would find its
way naturally into solid business opportunities.
But, as this issue of Apartment Finance Today affirms,
that's not the way most of our
audiences would say things work in the real world. Two
major obstacles here: Wall Street and Capitol Hill.
Big-money real estate, such as it is, is a
risk–reward hodgepodge of
speculation, local idiosyncrasies, policy, and, now, a
global economic tidal wave that crashes through every part
of the broader economic and housing landscapes. So, what
constitutes a good business—or
could potentially perform a solid operation that meets a
market need, pencils profitably, and runs
well—does not necessarily
bubble up among capital's Wall
Street gatekeepers. Nor do the projects where the need and
opportunity stars align work much magic among policymakers
who may lack the political will to channel
Uncle
Sam–backed dollars.
Speaking of bubbles, Wall Street is as likely to me-too
themselves into an unsustainable bubble in the
“sexy six”
markets—like a whole troop of
Cub Scout campers each trying to toast a marshmallow over a
campfire with a few glowing
embers—as they are to plow
their troves of yield-seeking funds into multifamily
projects that will make sense beyond the frenetic flurry of
the moment. So, exactly the issue
that's causing such a
compelling stir on Main
Street—the growing divide
between a tiny percentage of
“haves” and a
huge universe of
“have-not-enoughs”—is
playing out in the real world of multifamily housing
finance.
Intellectually, everybody understands the risks involved
in pouring too much money into too tight an arena. Too many
dollars from too many separate sources that funnel narrowly
into the same finite opportunity force
pricing and pro formas unsustainably and
irresponsibly into a vortex. Repeatedly,
we hear that while multifamily projects have proven through
the years to be among the strongest, most-reliable asset
classes for lenders, those very
lenders—the
government-sponsored enterprises among
them—are hemming and hawing
about chancing support for any project that
doesn't originate from the most
proven, most well-heeled sponsors.
So, we'll suggest here that
our audiences heed the Wayne Gretzky
principle of apartment finance, which is to go not where
the money is but where it's
going. This is why Jerry
Ascierto's analysis,
“Hot to Trot,”
starting on page 21 of this issue, is must reading for
prospective stakeholders, sponsors, and wannabe developers
eyeing Renter Nation's
burgeoning demand wave.
Likewise, now that Uncle Sam, via the Federal Housing
Finance Agency conservatorship of Fannie
Mae and Freddie Mac, has thrown its subsidization heft
behind single-family rentals via its fledgling REO Rental
Initiative, the same healthy disdain may be called for.
(See Jerry's examination of
this issue in “The Top 5 Risks
of Single-Family Rentals,” on page 26.)
When Wall Street and Capitol Hill interests synchronize so
felicitously, one can only shrug and resort to pushing
ahead with a solid business plan.