B (6:02)

As you know, which is that as.

A (6:03)

Much as everybody loves the long term tailwinds for multif family, those short term headwinds are also very real. So on, on the last day there I was talking to a buddy of mine in the hallway and he said, you know, it feels like it's neutral. And you know, I thought that was a good take. So I'm going to steal that from him. Neutral is, I think, the best way to describe the tone there. And, and also I would also just add this, that like the past couple of years, I think a lot of folks are hoping that the second half of the year is better than the first half of the year, both for fundamentals and transactions. Now every time I heard that, I said, hey, well remember everyone said that in 24 and 25 as well. And so, you know, they'd get some nervous laughter because obviously that was the case. But you know, on the other side of that, and in all fairness, I think you can make a plausible argument for 2H26 being better than the first half of 2026, particularly with a lot less supply arriving here in 2026. And of course, that assumes the economy and the job market is in decent shape. All right, number two, the second takeaway for nmhc, debt is abundantly available. All right, so remember a few years ago when rates shot up and debt was hard to find for a few minutes. And you know, in hindsight, you know, as we look back on that period of time, the market responded like it should and like it does. Rates went up and private capital shifted to debt strategies. And now it's a totally different story. I, I shared earlier on this podcast some comments from one of Blackstone's earnings calls or maybe, maybe his interview. And, and they made the comment that private credit returns are no longer as juicy as they were. And that really reflects the abundance of debt capital that's emerged and it's become more competitive now. The debt funds are competing with each other. And certainly we see this playing out in multifamily and it was on full display at NMHC in Vegas. But I heard that more than anything else that lenders are in pursuit mode. Debt funds are very eager to, to deploy capital and they seem to recognize that they're just not going to get the juicy terms that they expected when those funds were raised. So that means borrowers, especially those with institutional grade assets under control, you know, they're, they're the bell, the ball these days, you know, some. And that doesn't mean they're in great shape. I don't want to, you know, oversell that. But I meant like, you know, they're the ones that, you know, the lenders want to get to them. You know, some of the people I talked to, they were giddy over the terms that they are getting, including for preferred equity, as well as pushing lenders on things like, you know, just speed of close and flexibility, et cetera now. And when I, and by the way, when I, when I say they're getting giddy, and I'm not saying it's like, you know, low rate as rates as low as they were a few years back, but I just mean relatively speaking, you know, we've seen, you know, rates come down a little bit, but also, you know, the various terms that can really make or break a deal have gotten more favorable as well. So relatively speaking, it's gotten a lot better for borrowers now. So I mentioned earlier some of the implications of this. Well, first of all, one of the things that we're seeing is that higher quality assets, which are generally you know, newer vintages, good locations, they're able to recapitalize with pretty attractive terms and pretty generous valuations that, you know, valuations that are probably bacon in future growth and maybe not, maybe even above what they can trade for in the private market if they fully, if they went to market. And that's helping limit some of the pain for the sponsors. Now again, I don't want to oversell this. It's like it's a pain fee. It's not, it's rarely pain free and there could be some, some major implications to the, to the, to the previous capital stack. So I don't want to again oversell that at all. But.

B (9:56)

I'm sorry, one more thought there.

A (9:57)

I don't want to oversell this because obviously the values are still down from where they're at the peak. I don't think anybody's going to be, you know, assuming, you know, peak values still persist. I don't think it's that crazy. But what it does, it allows them to, these sponsors, allows them to wait out better times for an exit and maybe try to get some of that value back. So that creates an easy path for debt funds to deploy some capital and then if the borrowers default, a lot of those debt funds are equipped or maybe even eager to shift it to, to, to, to, to a loan to own and then, you know, manage the asset and sell it. By the way, this is also why that so called wall of maturities just always looks scarier on a chart than it really is in real life. The abundance of debt leads to an abundance of recaps, equals which then leads to this limited sales transaction. So a lot of these deals just aren't transacting in the market. I should say. There's not a lot of forced sales yet. I think we'll see more of them, but we haven't seen a lot of it yet obviously. So I think the mindset remains among a lot of owners out there. Why sell now at a discount unless you have to? And certainly some do have to, but a lot don't. And that's going to tie directly into our third takeaway from nmhc. Buyers are still patient. They're not expanding the buy box that much for the most part. And I've said this before, we've talked about this a lot in this podcast that nearly everyone with equity to deploy and that's an important caveat. People who actually have equity, you know, they're still targeting well located, newer vintage assets and at best maybe stretching to older vintages. If it's in a strong submarket, you know, maybe you want to buy the oldest deal in a great location that's mostly newer vintage stuff. But you know, that's been the case for a while now and even after nmhc, I don't see that changing much. Again, the buyback, everyone's still very disciplined in what they, what they're targeting. So for those newer vintage deals and good locations that's, that's been a very liquid market with some deals transacting in the fours again. But it's also a very thin market in terms of deal volume. More buyers than sellers, thanks in part to that recap activity I talked about earlier. So as all this plays out, you know, let me tell you something I've been starting to think about as a comeback from nmhc. So I think about all of these would be buyers that, who've raised capital, they've got dry powder to deploy. You know, I don't want to generalize too much, but I suspect I haven't talked to quite a few of them. I suspect some of them, I don't know that reality is fully sunk in yet that they're not going to be able to buy a lot of these high quality assets for quarters on the dollar barring some black swan event of some type. Meaning they may find some. But really scaling that strategy is going to be really hard unless you're buying a portfolio. And that's kind of a problem because they've raised capital on the premise that such deals would be widely available and at huge discounts to replacement cost. And that again really hasn't played out yet. Again certainly one offs. I mean there's definitely comps the market I think has established the pricing for that type of asset. There's enough of that to, to establish that. But just in terms of, I think no one's really built up that strategy at scale outside of some a handful of portfolio trades that we've seen. So I think by now it should be rather obvious that most of those types of deals that do have maturing loans or good real estate, good newer vintage stuff, you know, a lot of them are going to be recapitalizing rather than selling and trying to hold on.

B (13:34)

A little bit longer.

A (13:36)

And then what does hit the market in that profile again? You know, I, I do think that there's enough trading to really establish that what we know what pricing is, it's going to be high fours, low fives and those buyers are generally willing to accept still a fairly soft year one on the promise of you know, they say, hey, it's a great basis, it's a longer term hold, got a flexible exit strategy. So there's a trade off there. And I think the thing for all those groups is that yeah, the initial going in cap rate may be low relative to interest rates, but they're really banking on growth in the future years. And so the thought being that if you wait until that, until the spreads are more attractive then pricing maybe is not as favorable at that point. So we'll see. But I think that's how they're thinking about it. So where does that capital go if it can't find the discounted newer vintage deals that they really want? And we'll see. I, I think we're, I mentioned this earlier, I think we'll see. Some, they're going to start to entertain or are, I should not say start. They really are entertaining a very value, a very narrow value add box of, you know, focused on 2000s and 1990s vintage deals and, and good locations. I think good submarkets, they really matter more right now than I think they did, you know, four or five years ago. I think that's a pretty easy thing to conclude. The problem though that even that strategy is, remember we didn't build that many apartments in the 1990s and the 2000s. Those were low supply decades. And so maybe some will consider 1980s vintage deals if they're well located. And we did build a lot more in the 1980s, but a lot of that was built in submarkets that today we would consider less desirable and more economically challenged. So that's not, I mean there's more there for sure. But even that's not a kind of a home run strategy. There's, it's, it's still going to be tough to scale that. So all that said, I think some capital is targeting new development again hoping to deliver in 27 and 28 when supply is thin. But you know, I don't want to oversell. Every time I talk about maybe supply ramping up, I think people just jump to conclusions. They can get crazy. Again, it's not, it's still tough to get starts going. It's still much easier to find construction debt than it is equity or development debt than it is equity. And I also would tell you that when it comes to the equity side, you know, they're still looking for only deals that check every box. And so as that plays out, you know, that's going to be good for larger, well capitalized developers who have efficiencies of Scale access to capital. But I would really encourage not to jump to the conclusion that we're going to see a huge spike in starts anytime soon. Again, for most developers, debt is going to be accessible, but equity is not. And part of the real challenge I mentioned this, I think the last couple of weeks is that the lease up rents are back to 20, 22 levels. And so you got to get rents a little bit higher and stabilized and some concessions burning off for to see a meaningful increase in starts of any type. And even then I don't think it's going to match what we just came out of. All right, number four, fourth takeaway. Let's pick up the speed a little bit. Who is the buyer for actual distress? You know, we talked about this on last week's podcast with Mike Comparado and I'm going to ask Jeff Weidell today the same question on today's podcast. You'll get his take on it. And I've asked a lot of different people the same question, including nmhc. And I still can't quite figure out who, who will be the buyers at any scale. Again, that's the caveat here. Real scale. Who be the buyers at scale for older vintage deals in weaker performing submarkets? They're not older vintage deals. I've seen was, oh no, we're buying class C. Okay, you are? Well, where, well, they're still talking about good submarkets. I'm talking about the, the, the vast number of, of, of challenged properties and economically challenged submarkets, even if it's in a good msa. All right. And that's the kind of stuff that's less likely to get recapped, not as of as much interest to debt funds. It's probably going to face a reckoning on value we just haven't seen yet, at least not maybe. I don't think we've seen it fully yet. And you think about who the buyer has been and they've, it's really a type of people who are now trying to hold on to those assets. They're mostly sidelined, you know, doing capital calls, trying to hold on to those same kind of deals and their investor base is fatigued and they're not able to recycle capital into new deals. So I think a lot of them are going to be out. So I think what has to play out, and this is what we heard Mike talk about last week, and maybe Jeff will say similar today, is we probably just need to see cap rates widen out further for those lower quality deals for capitals Drawn back to it. I mean some, at some point it's going to be interesting again. But I just don't sense we're there yet. I don't think the market is seeing the pricing. They really, you know, one officer, but like at scale, I don't think the market's seeing the pricing that really makes that stuff interesting again yet. And even then I think you have a lot of groups that aren't just that aren't as excited about that older vintage product and, and than they had been in the past. Again, I hear people say all the time that those properties just get older every day now again, at a certain price.

B (18:59)

Sure.

A (18:59)

But I, I think, I think that's going to be a big question for the next couple of years. All right, number five, fifth and final takeaway from NMHC on fundamentals. It's still a renter's market. You know, we've seen some green shoots. We talked about this before in the rent roll. But it's still challenging, particularly in those higher supplied markets as well as some select spots like DC, Boston, SoCal. Still strong though in New York, San Francisco, Chicago, much the Midwest. But outside of those hotspots, most prospective renters today, you know, I've been saying this a lot like most prospective earners today, they're like car shoppers who expect a deal. They expect to pay below msrp. The high supply, high concession environment has, has conditioned them to expect a deal. Even if you could afford to pay list rent, you don't want to pay it, you expect a deal. So we'll have to see how this plays out here in 2026. I think even assuming some modest decent job growth, we should see at least partial concession burn off given the big drop off in deliveries this year. But that said, I think even the most bullish operators at this point, they recognize that those concessions aren't just going to burn off in one leasing cycle. It's going to take some time. All right, there's our recap of NMHC again. Stick with us for a conversation with Jeff Weidell. We'll get his take on how this year will play out as well. But first it's rental housing trivia. All right, today's trivia is presented by Get Covered, an industry leader in renters insurance compliance. Get Covered helps properties stay compliant, reduce risk and boost bottom line revenue. Learn more and book a demo@getcovered IO j. That's j A Y so check them out and get that slash J in there so we get some credit. If you don't Mind, it's getcovered IO J. All right, so the question today, in honor of NMHC's annual meeting, what did NMHC originally stand for prior to being renamed the National Multifamily housing council in 2014? So it's a subtle difference. The acronym itself did not change, and so there's your hint, and we'll give you the answer here in a bit. But first in the news. All right, in the news this week is sponsored by Authentic. If you've got a property that's underperforming and you can't quite figure out why, check out their multifamily leasing and marketing audit. They'll dig into your pipeline leasing funnel and comps and tell you exactly where things are breaking down, plus strategies and how to fix it. Listeners of the pod get 50% off, so head to authenticff.com Click on the banner to learn more and claim the offer. All right, three headlines for you this week. The first one comes from Biz. Now, it says, Camden reportedly reportedly looking to exit California with $1.5 billion portfolio sale. All right, so Camden is, of course, one of the Nation's largest apartment REITs, and they are reportedly planning to exit California, putting 3, 600 units across 11 assets on the market. By the way, this was originally reported by Real Estate Alert. And so Camden, of course, is just Southern California. They don't own anything in Northern California. Now, for anybody paying attention, this is not a huge surprise. SoCal, and especially Los Angeles, it's been a painful punching bag for the apartment REITs these last five plus years. And I would, I would guess that there's probably no mark in the country, even in the Sun Belt, that has earned as much negative airtime on REIT earnings calls than Los Angeles over that period of time. Camden has been probably blunter than others about the challenges there here on the rent roll. We had Camden CEO Rick Campo on the podcast a while back, and he, he was very candid about some of the challenges they had operating there. And on the earnings calls, you know, Rick has made very similar comments about regulatory hurdles related to operating inside California. You know, historically it was, hey, it's regulatory challenges to build, so if you can build something, you can do well. But after Covid, it was also now operating challenges. A lot of those operating challenges still persist. And on top of that, we've also seen just weaker than expected, persistently weaker than expected rent performance across the region. And, and, and Camden has linked that to demand side challenges. So we'll see how this plays out. SoCal certainly has become less institutionally favored of late, especially Los Angeles, but that there's still plenty of regional capital and contrarian players eager to bet on an eventual rebound. And I'll tell you, I think every single one of those buyers are probably talking up that 2028 Summer Olympics in their pitch decks for buying there. All right, next headline comes from Redfin News. It says the single family rental is on the decline. All right, good read from Redfin. It's true. I wrote about this and talked about this my Mythbusters about sfr. And yet it's still something that most American policymakers don't seem to gr. So check this out. Let me read this. Just 13.7% of single family homes are occupied by renters. The lowest share in records dating back to 2011. In total, there are 11.3 million single family rentals in the US the third lowest on record. By comparison, there are 12.1 million rental homes and large multifamily buildings, the highest level on record. There are 10 million rental units and small multifamily buildings and 3.1 million townhome rentals. All right, so basically, we've been losing, not adding, contrary to conspiracy theories, we've been losing singing family rental homes. So the growth we have seen the rental supply has come only because we built so many apartments. So anyway, great mythbuster, thank you to Redfin for this. And so give that a read if.

B (24:50)

You didn't see it.

A (24:52)

All right, our last headline, just real quick one. This one says new New York City law requires landlords to provide AC units, but not in public housing. And so it says building owners are required to install AC units for tenants who request them in the next four years, but tenants are on the hook for electricity costs. All right, so here's the crazy thing. You know, the city exempted the city's largest landlord itself, the city's own public housing, the New York City Housing Authority. So look, I mean, air conditioning is great. I'm a big fan of air conditioning. But I don't understand why New York and other cities like this continues to hold, continue to hold private apartment owners to higher standards than they do for themselves. It's obviously hypocritical. It's certainly not a way to treat public housing renters. You're treating them essentially second class citizens. They say, hey, y' all don't deserve air conditioning.

B (25:48)

Everybody else does.

A (25:49)

That doesn't make sense, honestly. I mean, here's the thing. If something's a priority, if you really care about it, you fund it. If you don't really care about it, you'll just demand everyone else do it, but not yourself. And that's what New York City did. All right, back to our trivia question of the week. Again, our trivia question was sponsored by Get Covered. The question is what did NMHC originally stand for prior to being renamed the National National Multifamily housing council in 2014? All right, so imagine it's a subtle difference. It's the same acronym. The answer, the National Multi Housing Council. And so in 2014 they added family National Multi Family Housing Council.

B (26:26)

So there you go.

A (26:27)

There's your trivia for the week. Next up, it's time for today's interview sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. Quick heads up for you. The registration for Funnels forum event is open. It's already more than 50 sold out. I'll be speaking at the forum this year and it's one of the only operator only events with conversations on what's changing in multifamily and a lot of candid talk about AI and centralization and the human side of operations. It's going to be March 23rd, 26th in Scottsdale at a five star resort. So if you want practical ideas you could take straight back to your teams. Check it out@funnelleleasing.com forum and hope to see you there. All right, our guest today is the CEO of Northmark, one of the biggest names in commercial real estate capital markets, active in commercial real estate, debt origination, servicing as well as investment sales and much more. And by the way, if you watch golf on tv, look for PGA golfer Brad Cauley. He's wearing the North Mark hat on the course. They just announced a two year sponsorship with him. So that's pretty cool. Anyway, North Mark, if you don't know, they've been around for more than 65 years, believe it or not. And today it's headed up by Jeff Weidell. I got a chance to pick Jeff's brain on capital markets distress, banks, debt, funds policy and the path forward. So here's my conversation with Jeff.

C (28:04)

Foreign.

A (28:09)

Welcome to the interview portion of today's.

B (28:11)

Podcast and I am absolutely honored to welcome in the head of Northmark, Jeff Weidell.

A (28:15)

So Jeff, thank you so much for.

B (28:16)

Being with us today.

C (28:18)

Well, thanks for having Northmark and thanks for having me specifically.

B (28:22)

Oh, I'm, it's, it's, it's, it's my honor. So Jeff, obviously A lot of people know Northmark. They know, at least they're familiar with you. But I'm sure a lot of people maybe not know your story and how you got into the business. And I always like to ask people this, so how, how did you get into all this?

C (28:37)

I, I, I like to ask people that too, because we come in through various means. It was a long time ago, way, you know, way back in the day I came out of business school. At the time, the two hot commodities were consulting and investment banking. Investment banking sent you to New York? I didn't necessarily want to go to New York. I tried a summer of consulting. It was interesting, but it wasn't for me. So an entrepreneurial, entrepreneurial business at the time was real estate was a little before technology. So we got a list of real estate developers, said, I want to be a developer. Sounds cool. Want to build buildings. And I would ask, if not you, who else should I talk to in the business? And two people the very same morning that I interviewed said, well, he's not a developer, but you should talk to this guy, Don Kieselhorst. And then I went to the next interview and he's a nice guy and he said, well, he's not a developer, but you should talk to this guy, Don Kieselhorst. And I figured, okay. I did what rational people do. I called Don Kieselhorst and he was a mortgage banker. They had been looking for someone with five years experience, hadn't found them, and I said, well, I'll kind of start in cheaply. And figured, yeah, and figured I would give it two years and see what the industry was like. And then another two years and now decades later, here I am. Never got to be a developer, got to do this instead.

B (30:00)

Yeah, well, I'm sure you work with developers at least, so that's, that's a great story. So given your background, the investment banking side, I'm curious to ask you this. You know, I've, we've had a lot of guests in this podcast. They've talked about the evolution of multi only asset management, investment management, property management over the last 15, 20 years with technology and real time data centralization. But what have you seen in the debt market? How is the multifamily loan origination business changed since you started? You know, particularly given the, you mentioned back then it was in the kind of more entrepreneurial nature of real estate. Now, like multifamily in particular, it's become a mainstream institutional asset class. So how has it changed in your.

C (30:40)

That'S a Great lead into it. And this is a great question. Easiest way to start is, is it's become kind of the dominant asset class for businesses like Northmarks. If you go back 20 years, 2006, I think you would find that office was our most predominant financing type. But we follow the industry and when we came out of the great financial crisis, the stability of the agencies of Fannie and Freddie to have a consistent, reasonably priced cost of capital, I think drove people into the multifamily market because the money was there, the availability was there. As that grew, people expanded markets. So they went beyond. I'm sitting here in Minneapolis today and I know a lot of the clients from Minneapolis went to Texas, went to Phoenix, kind of expanded out of their local region. So for companies like Northmark wanted a more national presence, national platform. Furthermore, to grow the platform, it was both a build and buy strategy. So they wanted companies like Northmark to help them with the acquisitions. Meaning are you in the brokerage business? Is there product to buy? So it's all evolved into this teamwork approach of a capital markets approach. Not just a one off loan, it's a relationship, buy, sell, finance and have kind of multiple options on the table for all of those, particularly financing.

B (32:13)

And speaking of financing, one shift we've really seen take off more in this last cycle is the growth of these debt funds. It appears that banks are playing a reduced role in direct lending. Debt funds are taking a bigger role. Is that in your view? Is this a, is this a structural shift or is it a cyclical one?

C (32:36)

So I look at it kind of the other direction and say what would lead them to go away? Why would they exit? Right, yeah, they're here. They were formed for a specific purpose. They serve real estate very specifically and you know, by definition. And when you think of banks, they're generalists, right? They lend on all types of athletes and all types of businesses. And real estate, real estate's a subset. But this is a focused real estate fund for our industry and it serves a purpose and a need. So you know, from my perspective, they're around to stay. Why wouldn't they be?

B (33:11)

And what are the implications for, you know, for sponsors out there for investors? Like, how does that change the game for them for the next cycle or so, if at all?

C (33:21)

I think it adds options and optionality is key. I think in all businesses that you have various forms of exits or finance and strategies and you know, particularly in the debt fund space, it's like if it doesn't fit neatly into the what I would Call kind of conservative buckets, the conservative bucket of a big bank lending platform or a life company lending platform. But it needs additional leverage and a lot of deals do because they got very large there. You know, there's a need for this type of capital, particularly I think in the more aggressive markets. You know, when we sit here in Minnesota and the upper Midwest, little more conservative, people put a lot of equity into deals and are a little more patient. But is it's very active in the Sun Belt. People need the leverage, these funds provide it and they're good at it.

B (34:15)

Yeah. So definitely, definitely seems to be increasing the liquidity of the sector for sure. That's a good segue to the next topic on distress. Obviously we've seen various estimates, potentially troubled loans and the story, I mean, you know this very well. You know, lenders have been patient so far for the most part. Relatively few foreclosures, little is traded. And so we're not seeing distress really move the, the needle for the market overall. So here we are beginning of 2026. So you know, do you, is it going to change this year and if so, to what degree?

C (34:50)

One thing I learned a long time ago, you know, back to the business school thing, we had a course called, the nickname was decision trees. I don't know if you ever went through something like this, but it was, it was assigning probabilities and determining outcomes. And the one thing I remember from that was the, the longer you could delay making a decision, the better off you are. You get better information, you have better opportunities for a better exit. So it seems frustrating to many of us, you know, sitting here in the transactional space wondering when this is going to break free. But it actually behooves the institutions to wait if they can't. So the question becomes what's going to force their hand this year? I do think it's coming. I think there's been a natural progression of first, provide an interest only period. Second, provide a short term extension. Third, the short term extension comes with a pay down of some sort and that starts getting costly. And most of these deals are at that stage where it's becoming difficult and costly for borrowers. And that's the point at which I think people really assess, okay, where are we going with this? Do we sell it, do we refinance, et cetera. And I looked at one last thing, if you don't mind, is I think there are a lot of three to five year deals put on the books. 2021, you could do the math. End of this Year, they kind of run to term and there are more of them in 2022. So more and more of this is going to break freedom.

B (36:27)

Oh, absolutely. Yeah. I think how this plays out is going to be interesting to watch. And so I want to dig in on something you just mentioned a little more. So when you have these situations, potentially troubled loans and maturities, some assets or various types of distress, what is the, you mentioned different type of outcomes, like what's the profile for type of deals that are going to get quietly worked out behind the scenes through extensions, refinancing versus deals that are going to, you know, end up on the market one way or the other.

C (37:00)

I think the key to all of it is probably the strength of sponsor and the strength of the developer and borrowing entity. The, the better the capitalization of the entity, the more the willingness of the lender or partner to kind of extend the deal and restructure in a way that kind of keeps it whole. The more there's trouble with a sponsor. I, I do believe institutions look around and say, okay, this may be a sinking ship and, and we ought to be the first off. Yeah, so, so that's what we're seeing mainly, you know, less region by region, less quality of property, more sponsor related. What's the strength behind it?

A (37:44)

Interesting.

B (37:44)

Okay, so let's, let's be on the sponsor. You know, I think another thing on the quality though, there certainly seems to be a, a detachment between where distress seems to be coming versus what capital wants. And so you have a lot of capital that's been raised to chase distress. But you know, it seems like almost all of it wants newer, vintage, well located, multifamily. And there's just a limited number of, I mean people, I always kind of get a kick out of the people say, oh it's so much cheaper to buy versus build. Well, yeah, if you could find the deals that are comparable to new construction, then sure, but that's just a limited pool out there. And obviously much of the stress that we're seeing is older vintage probably located.

A (38:23)

Kind of these busted value add deals.

B (38:24)

With the short term debt like you mentioned. So what do you think happens to these kind of a few parts here? Like what do you think happens to these funds that are chasing class A distress? Are they going to move down market, they move into development or what are you hearing from your clients and friends across the industry?

C (38:41)

Yeah, I asked a few people this because it's a, that's a very good question. It's slower in deployment than I think people would like. So what do you do when the capital is slow in deployment? You know, where do you shift ready to have it? I don't get the impression that people are going to go down quality. Yeah, it's just, it's a different animal. And they, you know, right now the yields are very tempting, I would say, in that space. Yet the assets kind of sit. So it, you know, maybe. I'm aware of one fund that was primarily a development fund that shifted to acquisition that within its terms said it could kind of go back into development depending on market conditions. So I'm thinking if that one would have been 70% acquisition before and 30% now, it might flip the other direction just based on opportunity. But I, but we don't really see it migrating out of the quality at this moment. And the question is really, does that big distress bucket ever really appear? And some of our leading brokers here are saying, I don't know, I, you know, it may be an opportunity that never was. I mean, as good of an opportunity as you're going to get is a minor discount to some build cost at a peak build price.

B (39:58)

Yeah, no, I think that makes sense. I'm just curious about, you know, what happens to the stuff that nobody really wants. Like obviously the cap rates have to spread out, but it just, I don't know who the buyer is for some of these deals. I guess so.

C (40:11)

So this is just in, you know, in external observation because we're kind of analyzing our results at Northmark for the last year, which we're good in improving, but probably not improving at the rate everyone would like them to improve. Right, sure. And you come to this realization that one of the big struggles we have right now is the lack of rent movement. And it's hard to get motivated to step into a deal when you don't know the direction of rents and when that direction is going to shift. I think we're kind of a market, you probably agree that's kind of bouncing along and almost a little directionless. And I think to your point, markets move when people see movements in rents they're picking up. I can acquire this. I could underwrite a rent trend. I could renovate a unit and get a decent return on the renovated rent, but kind of not there right now.

B (41:07)

Yeah, yeah. And I think especially that's a lot location specific. Well, as well, because, you know, even I talk to some of my friends who have capital right now looking to buy. It's like they'll say we're back in a value add. And I say okay, well, tell me what you mean by value add. And it's a, it's a much narrower definition in the past. It's like we want to be in a great submarket and buy the oldest crappiest building and fix it up. Okay, well that's a small box. Right. Because there's a lot of stuff in less desirable submarkets.

C (41:33)

Yeah, right. Most of it, you know, has kind of this look of being run of the mill. That's, that's a majority of it.

A (41:40)

Right.

C (41:41)

So it's not prime.

B (41:43)

Just, just more broadly, as you talk to your clients on the equity capital side, are, do you just, are you hearing more interest in or talk about expanding their buy boxes yet? Has anything changed relative to this time last year from your conversations with folks?

C (41:58)

We're waiting for that to change. I, I think it will be constructive at NMHC as the year kind of builds out here. I think we're, we're anticipating there's going to be some of that shift, but we haven't heard it yet. There didn't seem to be this urgency to close and deploy by the end of last year. But I sense even on the lending side and the equity side, the urgency is starting to build.

A (42:23)

Good.

B (42:24)

Yeah, we all need that.

C (42:25)

Meaning we need yield, we need to deploy capital. Where do we go? So, but we haven't really heard it yet, but I expect it's coming. I know it's not a satisfying answer.

B (42:39)

No, it's, I would give the same answer honestly. I was hoping you could tell me something. You had it's inside knowledge there, but now you're right.

A (42:49)

So.

B (42:49)

All right, let's talk about another hot topic, and that's the GSEs. Love to get your thoughts on potential privatization and how that might impact the multifamily debt market.

C (43:00)

No, I appreciate that. I'm pretty heavily involved in the Mortgage Bankers Association. I've had meetings this recently Even in Washington D.C. and you know, my read of this is they're kind of separating the privatization element and the release from a capital event in which a portion of the agencies are sold in the private market. So the two don't necessarily have to coincide. And it seems like the focus might be first on raising additional capital, you know, from a third party and keeping the agencies kind of largely intact. And in whole that would be good. I think there's recognition in D.C. that no one wants to mess up a good thing. And if it's working and it's keeping housing affordable for Americans, that's a priority in all this. So I, you know, if we roll back the tape to a year ago. Really didn't know. We still don't really know, but you're getting the gist that it's more on the capital side. Evolve this over time, you know, stay in the business, provide the liquidity in the markets and probably take it incrementally. That's my best read of it right now. And that would be a good outcome because all of this is kind of an eventual release is a good thing. They were never intended to be a part of the government. They probably shouldn't be. But there are a lot of questions in terms of government guarantees and structure, securities and things that can be worked out in time. If they were done shotgun style, that might be problematic.

B (44:32)

Yeah, it definitely seems very complex. Well, and you're much closer to it to me, but it feels like it felt like almost a sure thing 612 months ago and now it feels like, at least to me, again my outsider, it's like I'm not. It just seems like it's decreasingly likely it actually occur within the current administration is just, but is that, am I wrong on that? What's your sense of the odds changed?

C (44:55)

Again, this is me talking. You know, you get around D.C. people are very guarded about this approach.

A (45:00)

Sure, sure.

C (45:00)

I will say I talked to a senator about this and he said, yeah, I can't really tell you we're going to get leadership on this. We want to maintain the liquidity. And I said, well, can you tell me the timing? And he said over the next three years. So to your point, I, I think if you brought that up nine months ago, they might be saying this year. Right. But now the timeline is kind of pushed out a little bit. Like I said, I think a capital event is something they'll want to do and kind of get on that path toward privatization. But, but there doesn't, I think there's a lot of, there's a lot of work being done to really make the agencies more efficient at this point and produce more.

B (45:43)

Let me run this by. So I, I, I've, I'm certainly not an expert on, on, on the GSEs, but one thing we've seen over the last five years since COVID is, is we saw what I would call Pandora's box open with eviction restrictions during COVID And then we had the previous administration trying to install rent control through the gscs. And so I look at it as from like the operator side thinking like, okay, like is there is there additional risk and therefore even risk of the GSEs accomplishing their purpose of providing liquidity into the affordable housing market and multifamily in the US by staying in the public realm where it becomes somewhat of a, you know, a ping pong ball between who's in the White House and how they want to use the GSEs. Is that, is that, maybe I'm being cynical, but is that a fair take?

C (46:28)

Yeah, that's my read as well. I mean you, you know, you can feel the difference between administrations in terms of focus. So you know, it's there. So yeah, there's a consistency of being in the market, but kind of a lot of these secondary influences, like you said, about where the focus is for them, the size of the programs, you know, tenant protections versus liquidity to landlords do become a push and a pole and. Yeah, and it would be better if that was kind of out of the equation and it was more consistent in a private market. My opinion.

B (47:01)

No, I, I, I agree. I mean just, you need, I think people outside the industry don't understand. It's like for investors, like they need to, they just tell us what the rules are and let, and have us give us confidence they're not going to change. Like that is whatever they are, like, just give us that clarity. I mean, when, when it could kind of toggle back and forth between.

C (47:17)

Well, it kind of goes back to your first initial question here. I, I think the agencies played a big role in making the multifamily family industry what it is today by having that consistent form of liquidity and underwriting and knowing that this is kind of always available to the market in this way. Because if you remember, if you get into the CMBS market, which would be the alternative, or a bank, I mean they have times where they really pull the reins in because they have to. And the CMBS market blows wide. And you know, you're, you're at risk of being caught at just the wrong time in need of liquidity. And the agency's consistency with that is by nature beneficial.

B (47:59)

Oh, absolutely. We had David Brickman, Farmer Freddie CEO. As you know, he wrote a paper on that very topic about the, the role of how, how the gscs have provided liquidity into the multifamily market. And ultimately I think that's why we have American style rental apartments that provide a level of housing affordability that other parts of the world don't have. And so I hope we never lose that.

C (48:22)

I do want to give a shout out to my background as a Life Company correspondent here to say if they were listening to this say, well, don't forget about us. And we certainly don't. It's just, I believe this year the agency caps will provide $170 billion of liquidity. There isn't that much in all asset classes that the life companies are putting out. Right. So if you know, so there's just a money supply issue. They certainly provide a lot and a lot of flexibility, but it's to a limited set, not the broad market that the agencies do.

B (48:57)

Well, good shout out, shout out to lifeco folks out there. So let's, I'm asking another DC question. Obviously you have a leadership role at mba, so you've got a front view, front row seat on some of these topics. You know, regulatory form, red tape, reduction for housing production. That's been big topic, you know, nationally actually even, I mean red state, blue state alike. We're hearing more of that. Thankfully, the new FHA commissioner who obviously comes from a role understanding multifamily, Frank Cassidy, he's talked about this in his confirmation hearing and so I know you're active on these topics. Can you give any examples, reforms needed for multifamily specifically and any progress you've seen lately, Any, any kind of signs of, of, of hope and encouragement?

C (49:39)

Well, let, let's stick right there with Frank Cassidy. You know, FHA HUD is kind of a, a minor part of Northmark's business, but it's a major part of others and it's constantly been a source of frustration. I think, you know, it forever to move through the process. And they're very open, the administration seems very open, willing to be introspective on these things and has even said, you know, let's not look out there for problems. Let's focus on ours first and fix those and then, you know, take it iteratively, which I appreciate. And Chairman Cassidy is said the same, you know, with the process at hud. And they're, they're probably two big areas that they can improve with, in dramatically increase production and still protect, you know, the, the investors. I mean, one is there's a huge overreach in their environmental reports. And by environmental reports, I mean things like, like noise and sound. I forgot what other one we, we call those but fall zones. And I'll give an example. We were in a kind of an affordable housing meeting and we were talking about Los Angeles and developing apartments next to freeway. And I think you know where this is going. And all the private market says yes and FHA HUD says oh, that's too near a freeway. We don't do those. So this makes no sense. You know, it was put in at a different time in a different place. It's been institutionalized. And I think they could pare back all of those requirements, which also add months of time to be completed and you know, be more mainstream. The other is just like the agencies defer a lot on their underwriters, you know, the north marks of the world to review, accept and approve, you know, minor things so that they focus on reviewing the things that really matter to them. And like in the closing process with HA hud, it takes the. They're legal a month to complete kind of the closing package. Then it goes to HUD and it takes a month for them to review that. So it's now two months before it even gets out to someone. You know, the industry can do that. They could check the closing package and say, yeah, it's all there. And it gets out, that should take two weeks. So there's a lot of efficiency that could be done, including even the old regional model that they work through that. You know, if you're in Chicago, you got to go through Chicago office. I. Yeah, it's antiquated. It's antiquated and I think there's a recognition that it is and they'll try to fix it. So that's good.

B (52:22)

Yeah. I'll tell you a quick funny story. So I had a friend who had a construction, a new development going to through looking for an FHA loan. And he told me the story about how they're on a call with different people from fha. And one, everyone was like, I like it. I like it. One person said, I don't like it. I don't think we should do this. And that was it.

C (52:45)

There's no records.

B (52:46)

Yeah, it's like, okay, well. But yeah, some, you know, it's just hopefully they can make it a lot more efficient. But certainly, you know, credit to Frank Chairman Cassidy now, I guess I should call him, but he's seems to be putting the priority in the right place there.

C (52:59)

I've learned that hanging around Washington D.C. you're supposed to acknowledge their title.

B (53:04)

So, yeah, him and Scott Turner have to keep it. Okay, Secretary Turner. So. Yes, exactly now. And Jeff, I, I want to ask you one more question, if you don't mind. Obviously, you know, just this as we're talking, there's been some big news around executive order around Single Family Rentals. And it seems like I'm going to give you my take. You know, it's just, it's, it feels like this is going to, there's obviously a lot of negatives to it, but the one positive outcome could be we might really see a lot more capital further going into build to rent communities and kind of building that up more. So just any high level thoughts on the order and do you believe, do you agree with my kind of general takeaway there?

C (53:44)

So, yes, as a matter of fact, our chief of sales, Trevor Koskovich saw the article yesterday, said, well, this is good for us. You know, it's going to focus the capital investment into our, you know, our, our build to rent inventory. And for, for good reason. It is accepted from the order. I, I do know the origin of this and, and the origin isn't really familiar to me here, you know, sitting on west coast markets or different ones. But there are up some particular markets I understand, in North Carolina, in Georgia, where this is kind of a significant issue. You know, homes and communities come available for sale and often locals are outbid by the institutions and they have a big share of the pool of rental homes and communities in those markets. And it's leading to voter discontent. And that's where it comes from. It comes from like Americans are feeling it's unaffordable for me to buy. I'm being crowded out by this capital in the market where I want to buy. So that's kind of the intent not to slow down the rental housing community or the development of it, which is why then you get this exception in the order, which is this is serving a need. It's, it's adding to inventory the market. There's a market purpose behind it, so we'll get after it.

B (55:11)

Yeah, I mean there's certainly frustration in the market. I just think a lot of times people, you know, think it's an institutional buyer outbidding them. It's probably, you know, like, like, you know, Bob and Sally, you know, putting a flyer on, on telephone poles and, and just doing all this stuff. So, but, you know, it is what it is. But I do think, to your point, I mean, think, I think this will, I, I think for BTR folks in development will, it'll, it'll further expedite the capital shift we've seen.

C (55:38)

Well, and, and again, I think it's scattered site issue versus single site. Right. And I think the single site is a, is a defined business now. And.

A (55:49)

I agree.

B (55:49)

So I think we're in the early innings of the build to rent community space for sure. Well, Jeff, this has been a lot of fun. Thank you for letting me pick your brain and best of luck on 2026. Hope it goes. Be a great year for you.

C (56:00)

For you as well. Thanks for having.

A (56:23)

And that's wrap on episode number 70 of the rent Roll. A big thank you to Jeff for being our guest today. Thank you to jpi, Madera, Funnel, Mason, Joseph, Authentic, and get covered for sponsoring today's episode. And thank you to all of you for spending part of your day with us. We'll see you next time.