Fundraising Slows After Reaching Peak


Economic volatility brought by the coronavirus pandemic slowed the momentum of fundraising for “opportunity zone” projects, which had been on a roll with a  record haul of $1.6 billion in the first six weeks of the year. Since then, funds that file with the Securities and Exchange Commission have reported bringing in just $114 million, according to data collected by CoStar.

Unlike stock and bond prices that have rebounded on renewed investor and consumer confidence, investors still appear cautious about putting their money in real estate. Many are still trying to weigh how the pandemic has affected valuations and the economic rationale behind deals.

The slowdown comes at a time when advocates say civil unrest in the wake of the death of George Floyd, a black man who died while in Minneapolis police custody, has highlighted the need to steer fresh investment to underserved communities — a key aim of the federal program. While promoting the effort, some in Congress issued a report earlier this month urging participants to take steps ensuring their projects don’t exacerbate racial disparities.

Cresset Partners and Diversified Real Estate Capital were among fund managers with early-year success. The two firms’ Cresset-Diversified QOZ Fund I raised $465 million, and they launched Fund II before the coronavirus outbreak hit.

Nick Parrish, a managing director for Cresset, said raising money for the new fund has gotten off to a slow start, but he said that’s been true across most real estate funds.

“There was a period where everything shut down. People were paralyzed,” Parrish told CoStar News. “That’s not just for qualified opportunity zone funds, we saw it across all business risk assets.”

Still, he argued the value proposition of opportunity zones remains. Under the program, launched in 2018, if investors stay committed for 10 years, they can defer all the capital gains taxes due and what they earn.

“Market volatility is a reminder of the value of long-term assets. As people are watching their stock accounts bounce up and down, it’s a good reminder of owning long-term, cash-flowing real estate,” Parrish said.

The plunge in stock values in late February prompted a lot of selling and repositioning of portfolios. The capital gains from those sales could still end up in opportunity zone funds. Last month, the IRS extended the time frame for making investments to the end of the year.

The extension is significant because many investors have held off from making long-term commitments considering the broad uncertainties resulting from the economic downturn caused by the pandemic, according to Stephen Sharkey, a partner in the Baltimore office of DLA Piper who wrote a note posted on the firm’s website this month. Investors hesitant to choose opportunity zones now have more time to assess the recovery and decide where to deploy their money.

“A lot of those deals may still be good deals, but a lot of your assumptions you have to retest. You must look at things like financing, like taxes. You must look at things like construction costs and rent growth. All of these things are built into a model, and they all got thrown up in the air. What’s the future of office and what’s the nature of urbanization? Those are some big questions, and they had to be answered.”

Cresset and Diversified’s Fund I was set to finance two projects yet to begin. Cresset renegotiated construction costs for The Finery in Nashville, Tennessee, and opted to drop a hotel component in favor of more multifamily.

“I’m not sure I’d want to be delivering a hotel into this environment with what’s happened to hospitality,” Parrish said. The pandemic “gave us a little window to pivot.”

Protests Create New Challenges

Opportunity zones provide tax breaks to investors who transfer recently realized capital gains into qualified funds that sink money into real estate projects and businesses located in specially designated economically distressed areas, with a goal of boosting jobs and housing. That ties those funds directly to communities more beset by racial and economic inequality, the kinds of places that have attracted attention during the nationwide protests over Floyd’s death in Minneapolis.

About 16% of Minneapolis is made up of people of color, but African Americans total 30% of the city’s population in opportunity zones, according to data from the Congressional Black Caucus Foundation, whose members include Sens. Tim Scott of South Carolina and Corey Booker of New Jersey, the Republican lead and Democratic co-sponsor, respectively, of the law that created the opportunity zone program.

In a report released this month, the caucus said the program has the potential to facilitate growth in distressed communities through promoting business creation. But it could also become a subsidy for gentrification rather than preserving and stimulating the local economy.

“With the high concentration of people of color, it is important to pay close attention to the effect of programs that encourage investments in low-income communities of color to ensure racial disparities are not fueled but are closed over time as a result of both direct and indirect economic gains to the community,” the caucus said.

To ensure opportunity zones have the maximum potential to benefit the residents living in those areas, the caucus included several recommendations for improvement:

  • Consult with community members to determine what new businesses will be created.
  • Provide adequate job training.
  • Allow residents to contribute to qualified opportunity funds and receive tax benefits.
  • Create new housing that reserves a percentage of affordable units.
  • Create a public system to measure the impact of investments and help ensure transparency.
  • Reserve a percentage of jobs during construction for residents.

Since the Floyd protests began, several new funds and initiatives have launched to support black businesses or work with community agencies on fund deployment.

PayPal Holdings announced a $530 million commitment to support black and minority-owned businesses and communities in the United States, especially those hardest hit by the pandemic, to help address economic inequality. The commitment earmarked $500 million to create an economic opportunity fund.

“Black lives matter and we need to drive transformative change. We must take decisive action to close the racial wealth gap that sustains this profound inequity,” Dan Schulman, president, and chief executive of PayPal, said in a statement.

Ellavoz Impact Capital, a New Jersey-based social impact qualified opportunity fund management firm, announced a partnership with New Jersey Community Capital, the state’s largest nonprofit financial institution specializing in development, to launch the Ellavoz Shared Values Opportunity Fund. The fund’s purpose is to provide equity capital for affordable housing projects and entrepreneurism.



Source: Mark Heschmeyer CoStar News June 18, 2020 | 09:49 AM


The outlook for the fall semester was overwhelmingly positive, with 93 percent of respondents indicating that they expect fall semester to open on time with residents in on-campus housing.

The coronavirus (COVID-19) pandemic has had a major impact on all aspects of on- and off-campus student housing. In an attempt to better assess that impact and the sector’s outlook for the future, Student Housing Business (SHB) conducted a survey of industry professionals over the course of several weeks in May.

The survey was segmented by industry function for specific elements of the business, allowing SHB to better understand the pandemic’s distinct influence on each segment of the industry. 

Of the survey’s 569 respondents, 79 defined their role in the industry as that of an on-campus housing officer or operator. In this segment of the industry, 38 percent of institutions laid off or furloughed employees, and 24 percent instituted pay cuts.

Sixty-four percent of respondents noted that they are involved with traditional on-campus residence halls; 10 percent are involved with public-private partnership development; and 26 percent work with both types of residence halls. 

Of those polled, 88 percent of universities saw residents leave behind clothing and belongings when they moved out in March following evacuation orders due to the pandemic, and 67 percent had not begun the process of turning on-campus housing rooms yet. 

Looking toward the summer, 60 percent of respondents indicated that they do not anticipate summer camps, internship programs, students living in on-campus housing, or courses over the summer.

Of the group that operates on-campus housing as part of a public-private partnership, 57 percent did not close their doors at the same time as traditional on-campus housing. Sixty-nine percent offered the same rent concessions and forgiveness, however. 

The outlook for the fall semester was overwhelmingly positive, with 93 percent of respondents indicating that they expect fall semester to open on time with residents in on-campus housing. Eighty-eight percent expect there to be modifications to housing and dining as a result of COVID-19 in order to promote social distancing. Ninety percent of institutions polled were developing those plans at the time of the survey. 

In terms of quarantine planning, 79 percent of respondents indicated that their institutions were planning on keeping an existing on-campus housing facility offline to use as potential quarantine space during the 2020-2021 academic year. 

Seventy-nine percent of respondents believe that future on-campus housing projects will need to take social distancing and other implications from COVID-19 into account, but 83 percent do not anticipate their institution moving to renovate existing traditional residence halls in direct response to the pandemic.  



Source: REBusiness Online Posted on June 24, 2020, by Jeff Shaw in Features, Student Housing


The continuing long-term decline in turnover has accelerated recently due fewer tenants moving because of the COVID-19 economic downturn


A commercial real estate services company is reporting seeing that landlords of multifamily property are seeing turnover fall to the lower levels in more than 20 years.

According to a report by CBRE, turnover, which is the percentage of total rented units that are not renewed each year, fell from 47.5 % in 2019 to 42.1 % in April. The report attributes the decline to historical trends that have been exacerbated due to the coronavirus pandemic.

“The continuing long-term decline in turnover has accelerated recently due to fewer tenants moving because of the COVID-19 economic downturn,” the report said.

The report, however, said the new isn’t all bad since the benefits of lower turnover generally outweigh the disadvantages. Specifically, the report said landlords can see cost savings from continuing rent income and from having fewer “make-ready expenses,” which can range between $1,800 and $3,000. Rent increases are also generally higher on renewals than from new leases, the report said.

According to the report, the COVID-19 lockdown mandates and related uncertainty have discouraged renters from moving, which has helped owners maintain occupancy and cash flows. The report also said turnover is expected to rise from April’s low, given that there’s been an acceleration of leasing activity in May. However, the report said, turnover is expected to remain low for the rest of the year.

Historically, turnover has been falling since 2000, when it was around 65%. The report said that turnover began rising in the mid-2000s because of greater economic opportunity for renters, increased units, and an influx of young millennials entering the market. The past recession led turnover to fall, however,  and only in recent years did it begin ticking back up again, according to the report.

Despite the overall trends, the turnover rate has differed greatly depending on the geographic regions. Some real estate investment trusts have reported that metro areas like New York and Washington, D.C. had the lowest turnover rates for the first quarter in 2020. The reports attributed this to the pandemic and seasonal trends. The South and West saw higher turnover rates, while the Northeast and the Midwest also saw lower rates, the report said.

These trends likely won’t significantly change due to the COVID-19 pandemic, the report said, but different infection rates and localized seasonal trends could influence the rate.

“Northern metros only recently entered the spring leasing season, so turnover rates were not as affected by the early stages of COVID-19 as they were in other warm-weather metros that were already well into the spring leasing season,” the report said.


Source: GlobeSt. By Max Mitchell | June 08, 2020, at 11:59 AM

Why Multifamily Rents are Holding Up Better than Expected


A feared collapse in apartment rent collections amid the COVID-19 shutdowns has failed to materialize. But can that streak last?

Despite mass unemployment and underemployment, multifamily rental payments have held up far better than many industry experts expected amid the economic wreckage caused by the spread of the novel coronavirus.

 More than 36 million people have filed for unemployment in recent weeks and millions of others working fewer hours and taking reduced pay. That’s amid new estimates that real GDP growth for the second quarter will come in at -42.8 percent. Toss in a backdrop in which, as of December,  69 percent of Americans had less than $1,000 in savings accounts, and it would seem to paint a bleak picture on the ability of renters to meet their obligations.

Yet 87.7 percent of apartment households made a full or partial rent payment by May 13,  according to a survey of 11.4 million professionally-managed apartments across the U.S. by the National Multifamily Housing Council (NMHC). That’s up from the 85.0 percent who had paid by April 13, 2020, during the first full month of the crisis caused by the spread of the coronavirus. That’s also down from the 89.8 percent of renter households who made rental payments the year before when the U.S. economy was still strong and long before the coronavirus began to spread.

“Once again, despite the economic and health challenges facing so many, we have found that apartment residents who live in professionally-managed properties are meeting their obligations,” said Doug Bibby, NMHC President.

So what gives?

There are a few things at work. For one, NMHC’s dataset is weighted towards renters more likely to be able to continue working their jobs remotely and those with some savings as a backstop.

NMHC gathered its data from five leading property management software systems: Entrata, MRI Software, RealPage, ResMan, and Yardi. It does not represent all apartments in the U.S. For example, the data does not include many government-subsidized affordable housing properties. “These excluded properties are the ones more likely to house residents experiencing financial stress,” says NMHC’s Bibby.

The data also does not include smaller apartment properties that typically don’t use those software systems.

“There are thousands and thousands of buildings with 10 units, 20 units, 40 units,” says John Sebree is the senior vice president and national director of Marcus & Millichap’s Multi-Housing Division. “They generally don’t have property management software…. However, they generally have personal relationships with their clientele. [So,] their collections are a little better.”

In all, the percentage of renters who made full or partial payments at less-expensive,  class-C apartment properties continues to be lower —by about five percentage points—than the percentage of renters at class-A or mid-tier class-B properties who made payments.

“There’s a little more financial distress among residents of lower-priced Class C properties,” says Greg Willett, chief economist for RealPage, Inc. “Many of those who held jobs in hard-hit industries like hospitality and retail stores live in the nation’s class-C apartment stock.” These families often earn lower incomes and have little or no emergency cash reserves to deal with income interruptions, says Willett.

Still, even in class-C stock, the percent paying rent remains high.

A big reason: The expanded federal $600-a-week unemployment benefits put in place as part of the CARES Act on top of whatever each state normally pays out has left many workers making more money now than when they were in their jobs, enabling them to keep up with rental payments.

 As an analysis from explained, Congress arrived at the $600 a week figure by looking at the national average unemployment payout of $370 per week and the national average salary for unemployment recipients of $970 per week. So the goal of the $600 was to make up the difference.

But given the income inequality in the U.S., far more workers’ wages are below that average figure than above. The net result has been that for millions of workers, being unemployed has led to a rise in their weekly pay. The multifamily sector has been a backdoor beneficiary of that federal largesse since it has translated into more people being able to pay rent than one would expect with an official unemployment rate approaching 15 percent.

“The enhanced unemployment benefits provided by the CARES Act are helping the financial burdens of those who have lost their jobs,” says Willett. “These households appear to place rent payments as a top priority.”

The issue going forward, however, is that the expanded benefits are scheduled to expire at the end of July. So the concern multifamily property owners were feeling before the CARES Act was enacted could rise anew later in the summer if the economy has not sufficiently recovered.

“As current federal support programs begin to reach their limit, it will be even more critical for Congress to enact a meaningful renter assistance program,” says Bibby. “It’s the only way to avoid adding a housing crisis to our health and economic crisis.”

Regional differences

Rental payment rates are also varying by region.

“Rent payments tend to be best in the places where the local economies are heavy on the tech sector or government defense tend to have the high shares,” says Willett. May’s best collections through about the middle of May 2020 are in Sacramento, Calif.; Virginia Beach, Va.; Riverside-San Bernardino, Calif.; Portland, Me.; Portland, Ore.; Denver, Colo.; and San Jose, Calif. “Some 93 percent to 94 percent of households in these places have paid their rent.”

Trouble spots include New York City; New Orleans and Las Vegas. These are locations where the spread of COVID-19 has been especially challenging or where tourism is particularly important to the local economy. The payment figures also are well under normal in Los Angeles, says Willett. Higher-cost markets like New York and Los Angeles are also cities where the expanded federal unemployment payouts are less likely to result in unemployed workers making more than they did while they had jobs.


Source: Multifamily Investor Bendix Anderson | May 19, 2020


Federal Government Action Will Assist Renters in Maintaining Income; Strong Multifamily Fundamentals Pre-Coronavirus Provide Sturdy Framework


Unemployment benefit expansion mitigates financial impact. Many throughout the nation are faced with uncertainty as COVID-19 rattles the economy and labor markets. The federal government has been fast-acting in its response, exhausting numerous fiscal and monetary measures to keep the economy afloat and provide income to those who suddenly face hardships. Unemployment benefits have been both increased and expanded, supporting laid-off workers’ ability to stay up to date on important bills, including rent. The new criteria for unemployment benefits include freelance workers, the self-employed, contractors, and part-time personnel in addition to those who would typically meet specified standards. The federal benefit period lasts until July 31, and those who qualify for unemployment will receive $600 per week on top of a state benefit, which varies throughout the nation and generally aligns with the cost of living. State benefits will also be extended an additional 13 weeks beyond the exhaustion of the prototypical benefit period. This action will be wide-reaching and relieve some of the stress that hangs over both tenants and owners of multifamily. Although, the process of distributing payments will likely be delayed as unemployment offices are being overwhelmed with requests.


Government payment provides renters with an income stream to offset financial burdens. The other vital aspect of the stimulus package is the one-time payment to all adult Americans that filed taxes in 2018. Most adults will receive $1,200 in addition to $500 per child under the age of 17, with installments phasing out for individuals that made over $75,000 and dropping off completely above the $99,000 threshold. The federal government has indicated that direct deposit payments will arrive by the end of April; however, those who will be receiving checks in the mail might not get them for at least a couple of months. The additional income should make up for some wage losses and supplement income streams for those who have not been negatively impacted. Based on early reports, 69 percent of renters were able to meet April rent obligations by the fifth of the month, down 13 percent year-over-year despite unparalleled circumstances. 


Apartment fundamentals on solid footing entering this year. Multifamily housing performed exceptionally well over the course of this cycle, driven by the affordability of renting an apartment relative to owning a single-family house, and the younger generations’ preference for leases and added amenities. Over the past few years, workforce rentals became increasingly undersupplied, as vacancy was near 20-year lows ending 2019. Among the three segments, Class C vacancy contracted by the greatest margin since 2009’s peak, dropping 570 basis points into the mid-3 percent range. Class B vacancy followed closely behind, dropping 330 basis points since the Great Recession peak into the low-4 percent area as of the beginning of this year. Tightening conditions have supported the need for rapid inventory growth; however, rising construction costs have led builders to construct more Class A units, which has not provided much relief for the budget-friendly rental segment. Despite the elevated construction of luxury apartments over the past decade, Class A vacancy has also dipped 230 basis points since 2009 into the 5 percent range, demonstrating robust demand throughout all echelons of multifamily housing.



Challenges Presented by the Virus-Driven Downturn

Will Differ Throughout the Nation


Some markets and niches are better prepared to weather the storm. The risk level that the apartment industry will face differs throughout the country, as some markets and population segments will have to combat more pronounced headwinds. Lower-tier space may be burdened by the fact that their tenant base is more likely to be affected by job losses and financial hardship, whereas midtier space might be better suited to maintain cash flow. Additionally, upper-tier space has a stronger ability to avoid losses from missed rental payments as more tenants are able to work from home and have savings built up; however, newly built luxury apartments will find it difficult to build a tenant roster over the short term. Working-class rentals in some of the nation’s more expensive cities will face obstacles as government payments don’t go as far as to cover monthly rental costs. On the other hand, metros with diverse economies will be less at risk as several sectors of the U.S. economy are still functioning, including technology, industrial and construction. 


Multifamily owners will have to overcome hurdles. In the short term, finances will have to be closely watched and managed, as a reduction in rental income is entirely possible, while expenses may arise concurrently. The extra costs to maintain clean common areas through increased labor and sanitation, as well as the likelihood of more maintenance expenses linked to wear and tear as residents spend more time than usual in their apartments will be hurdles. Additionally, owners of newly built apartments will find it more difficult to fill units, as fewer people are moving around and actively searching for residences. A longer-term headwind could be the slowdown of household creation amid more people moving back in with their families or seeking roommates due to financial burdens. These challenges will dissolve once the economy is returned to full functionality and the health crisis is over, but with no clear timetable, it is important for owners to be cognizant of the obstacles they will face.


National Insights:

• Large tourism-based economies are facing more direct impacts that will weigh on their labor force. These headwinds may linger until the population feels safe traveling again.
• Rentals in markets at the height of their COVID-19 outbreaks are more at risk from strict shelter-in-place orders. State and local government reaction will be vital to regaining economic momentum.
• Regional logistics hubs in the Midwest and the central U.S. may be more stable, as e-commerce will act as a tailwind in maintaining the job market. Although, international supply-chain disruptions may have an adverse impact on some coastal markets.

Federal agencies and local governments putting moratoriums on evictions. The CARES Act initiated a 120-day eviction moratorium that disallows borrowers of federally backed mortgages or who participate in federal assistance programs from beginning eviction proceedings for nonpayment, started on March 27. These same landlords must also give tenants a 30-day notice to vacate the property after the eviction moratorium period has passed as well as conform to local eviction laws. Landlords that fit into these classifications and have fewer than five units fall under the homeowner protections included in the CARES Act, which disallow evictions for 60 days started on March 18. Properties without federally backed mortgages or that do not participate in federal assistance programs would default to the state provisions. More than half of the state governments have enforced a pause on evictions, typically lasting between 30 and 60 days. Additionally, local governments, particularly in some of the nation’s most densely populated cities, have followed suit in halting evictions through at least the end of April. Owners that are not disallowed from evicting tenants should take into consideration that it may be more challenging to fill vacant units given the current conditions.


National Multifamily Housing Council Recommendations:

• Halt evictions for 90 days for those who can show they have been financially impacted by the COVID-19 pandemic. (Does not apply to evictions for other lease violations such as property damage, criminal activity or endangering the safety of other residents and staff .)
• Avoid rent increases for 90 days to help residents weather the crisis. Create payment plans for residents who are unable to pay their rent and waive late fees for those residents.
• Identify governmental and community resources to help residents secure food, financial assistance, and healthcare and share that information with residents.


Borrowers of federally backed mortgages granted relief. The Coronavirus Aid, Relief, and Economic Security Act includes protections for those with multifamily mortgages backed through federal agencies, including Freddie Mac and Fannie Mae. Borrowers of these agencies may request loan forbearance, given that they were on time with payments through February 1 and can provide proof of financial hardship from the new coronavirus. The period of forbearance is initially set at 30 days, with two additional extensions available for borrowers that request it within the time frame specified in the agreement. This may be a resource that provides owners an opportunity to cushion themselves, while being aware that it includes stipulations for owners, including bans on evictions and disallowing late payment fees. Additionally, those who seek forbearance will be required to repay within 12 months. Borrowers with mortgages through private lenders should communicate with their providers to discuss options that are available to help them through this challenging time.


Governments Pausing Evictions;
Loan Forbearance Available for Borrowers



Owners Acclimate to Changing
Conditions; Long-Term Outlook Strong


The apartment industry is adapting to combat headwinds. During times of uncertainty, owners may find it necessary and beneficial to be more hands-on with their investments. Open communication with tenants regarding their financial status could formulate realistic expectations for rental income so that owners can anticipate any losses and put plans in place to maintain cash flow. Additionally, owners facing financial uncertainty should reach out to lenders to discuss loan forbearance options and talk to property managers about logistics and operational procedures. Every owner will face their own unique challenges, and the ability to adapt while in the unchartered territory of a global pandemic will be favorable in prospering through these headwinds. Some may even find this is an opportunity to retain quality tenants through new leases, as they are less likely to explore other options during the crisis. Investors looking to buy and sell will have to discover new pricing as the eminent downturn will alter asset values and underwriting standards.


Multifamily remains a solid commercial real estate investment through periods of uncertainty. The $2.2 trillion stimulus bill provides a safety net for the short term while the population works together to slow the spread and medical researchers race to find a vaccine that can bring a sense of normalcy back to daily life. Multifamily owners are concerned with the financial impact that will come of this, but several factors support an optimistic viewpoint. Government payments and unemployment benefits will help renters replace lost income over the near term, enabling them to pay on time. The underlying trends that have supported apartments throughout this cycle continue to be in place and will sustain robust demand for rentals in the long term. One of the fundamental principles driving multifamily housing is that people will always need a place to live. The global pandemic will not push prospective renters toward single-family housing as an alternative as the rent to home payment gap remains significant.

National Multi-Housing Group
John Sebree First Vice President, National Director | National Multi-Housing Group

Prepared and edited by
Ben Kunde Research Associate | Research Services

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guaranty, express or implied, may be made as to the accuracy or reliability of the information contained herein. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Experian; Federal Reserve; Global Financial Data; MBA; Moody’s Analytics; NYSE; Real Capital Analytics; RealPage, Inc.; Standard & Poor’s; TWR/Dodge Pipeline; U.S. Census Bureau; Yardi © Marcus & Millichap 2020