State of CRE with Kris Mikkelsen, Ivy Zelman, and Aaron Appel

In today's episode, Willy welcomes Kris Mikkelsen, Ivy Zelman, and Aaron Appel. Kris Mikkelsen is the Executive Vice President of Walker & Dunlop Investment Sales and is responsible for the origination and execution of investment sales and equity capital raise for multifamily assets focusing on the Southeastern markets. Ivy Zelman is the Executive Vice President of Walker & Dunlop Research and Securities. She is also the CEO of Zelman & Associates, a leading housing research and investment banking firm acquired by Walker & Dunlop in 2021. Aaron Appel is the Senior Managing Director of Capital Markets at Walker & Dunlop. He focuses on sourcing and structuring financing for all commercial real estate asset classes nationally.

The episode starts with Ivy stating that the overall underwriting has significantly changed in terms of stringency and more conservative rent assumptions due to the uncertainty of capital cost. Kris explains that negative sentiment shows across the board because of the low supply index. A hawkish stance remains unless employment figures hike up. Core plus value-add multifamily assets have liquidity but cost more, according to Aaron. If borrowing costs increase substantially, less is needed to pay for the asset. Talking about his recent bridge loan, Aaron mentioned a good spread for the lender in loan value versus loan amount. Ivy adds that overall rent growth is holding up at levels of renewal basis; however, renewals will be stickier. Her forecast for rent growth is above 4.5% and moderation to 2%. The data is much more optimistic compared to new move-in rates. She also describes how more competition, such as in the supply from build-for-rent (BFR) operators or investors selling single-family rentals (SFR), is expected in 2023 and puts more pressure on decelerating rents. Affordability is also a factor for for-sale builders to turn to the rental market and sell units on a scattered basis.

Tune in to this new episode of the Walker Webcast — State of CRE with Kris Mikkelsen, Ivy Zelman, and Aaron Appel. ▶️

Key Points In The Webcast:
00:35 Willy welcomes Ivy Zelman, Kris Mikkelsen, and Aaron Appel
02:34 State of capital and underwriting
07:37 Financing and a bridge loan
10:06 Rent growth, competition, and move-in rates
15:52 Challenges in construction loans
17:17 Anecdotes on the challenges and a probable cause
23:51 Private capital, BREIT, and inflation
29:04 Possible relief of inflationary pressures
32:57 A leeway for certain markets
37:20 The biggest issue in the financial system
39:10 Mortgage and low leverage
41:22 SFR/BFR and a hopeful forecast
44:35 Land development
46:04 What smart money is doing now

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