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The Rent Roll with Jay Parsons
EP#74 Jason Morgan | Inside Multifamily's Biggest Family Business
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Welcome. Welcome. It's episode number 74 of the Rent Roll your podcast on all things rental housing, apartments, single family rentals and Build to Rent. We got a good one for you this week, or at least I think so. We're going to dive into the apartment industry's biggest family business, Morgan Properties. Those of you don't know the story. It is a truly remarkable American success story. Mitchell Morgan, the founder, he has just passed the reins of the company he started over to his sons Jonathan and Jason. We're going to be joined in today's program by Jason Morgan. And again, if you don't know this story, it's, it's a great one, incredible story. Mitchell Morgan, he started off as a Pennsylvania shoe salesman who eventually worked his way into buying three suburban Philadelphia apartment buildings for a dollar down. And you'll hear that story from Jason. And that was back in the mid-1980s. The family still owns those three Philadelphia area apartment buildings today. Plus they've added about 110,000 more units since then. Mitchell Morgan expanded that business across 22 states. Now the Morgan's the number two apartment owner in the nation's in the nation According to the NMHC top 50 list, behind only a little company we know as Graystar. And there are of course a lot of big names behind them on that list. Names like maa, Nuveen Equity Residential, Avalon Bay, related Cortland Essex, JP Morgan and on and on and on. So really remarkable story. You're going to hear that story today from Jason Morgan and also we'll talk to him about what it means to have this new generation of leadership, the second generation of the family leadership. Is the buy box going to change much? And if you followed Morgan in these recent years, you know that they've made some really big moves into the Midwest buying some big portfolios there. In fact, they're probably been the biggest buyer of Midwest apartments over the last five plus years. So we'll talk with Jason about all that and also ask him about what it's like to be a co CEO with his brother Jonathan. I'm sure that's a fun and unique experience. And, and then before we do all that, I'm going to share with you some broader macro data on where we are nationally on apartment sales, where things sit today. There's been a lot of talk about this and people see the cap rate numbers, they say, hey, the, the composition is skewing those cap rates down. So I dove into this, I want to look at, hey, what is actually trading and I've got some data and some slides I'm going to debut with you today that really highlights the capital is coming back to some degree at least, but it's very focused on certain types of sub markets and it's a split that we really haven't seen for at least last 20 years. So I think it's going to be an interesting, it is an interesting subplot to the multifamily capital story right now. So stick with us for all of that. Now, before we jump into it all, I want to give a big shout out as always to our wonderful sponsors, first and foremost to jpi, a leading apartment developer. The state of purpose to transform building, enhance communities and improve lives. Check them out, jpi.com and of course, also thank you to Madera Residential, a leading apartment owner and operator based in Texas expanding into the southeast. Maderaresidential.com all right, so we kick it off a little section we call Here's a chart. And as I mentioned, I've got some fun ones to share with you today. This segment's going to be presented by Mason Joseph Multifamily Finance, the number one FHA construction lender in the Southwest for a reason. Since 2016, Mason Joseph has closed as many FHA construction loans in Texas and surrounding states as the second and third place lenders combined, according to my friends there. So check them out. Mason JOSEPH okay, so as I mentioned earlier, there's been a lot of buzz that about this return of capital, how much has really happened. And there's been a split that I think we all kind of know intuitively. But I'm going to present to you in a way that I, I haven't, at least I haven't seen really presented. So I'm excited to share it. And the bottom line is this capital, just like renter demand, is going through a flight to quality moment, not the flight to affordability moment. It's been a flight to quality moment. And, and so I mentioned earlier, there's been a lot of talk about how cap rate's been skewed down where by the composition of what's trading, which is mostly newer vintages, A's and B pluses. And so I want to see if that same pattern holds up by submarket. And so here's what I did. I created three tiers of submarkets. So submarkets, you know, these are neighborhoods within an msa. Three tiers, the higher rent, middle rent, lower rent, very simple. Each tier is based on the submarkets rent relative to its parent, Metro's Average rent. Okay, so that was, you know, that way we could identify the more desirable higher end areas of each market, not just the most expensive ones in the country, which obviously is going to skew toward higher cost MSAs. And then we're going to overlay sales volumes by those submarket rent tiers. And then we're going to roll it back up and we're going to index sales volumes to 2019 to kind of normalize and smooth out a little bit. And as. And we'll use that as a way of answering the question, where are apartment sales today compared to pre Covid highs? Now we know we're not back to 21 and 22 levels. That's obviously, let's look at it on a more normalized basis. Where are we today versus 2019? And the results are super interesting. Okay, so first of all, if we look at this for all apartment sales nationally, look at everything, regardless of submarket tier, regardless of market nationally, apartment sales in 2015 are about eight years, I'm sorry, they're up a little bit from 2024, but there's still the lowest levels. If you go back to pre Covid years, you have to go back to about 2017. Okay, so about about eight year period. But here's where it gets interesting. That pattern varies not only by market, but it varies even more by submarket and specifically the level of rent in these submarkets. So in these higher rents, again, three tiers, high, middle, low. In the higher rent submarkets Nationally, sales volumes 2025 were, were close to 2019 levels, about 90% back on this index. Okay. In the middle rent submarkets, volumes are about 83% of 2019 levels. And then in the lower rent submarkets, this is where it gets interesting. Sales volumes are just 67% back to 2019 levels. Okay, so there's a real relationship between submarket quality and asset liquidity. Now that may sound obvious, but it's notable because historically on our index here, there really has never been this much variation. And I took this back to 2010. Okay, the three tiers have basically moved in lockstep more or less from the 2010s to the early 2020s and the big boom in 2122. And then it split off these past couple of years and it really was remarkably tight. If you can see the chart on the screen, for those of you who look at the video version, from the late second half of 2010s into the 2020s, in particular the first few years of 2020s, it really did move in lockstep. But now again, we're seeing this split off with lower rent areas, lower rent submarkets, not markets, low rent, sub markets lagging behind. Okay. And I think that reflects a few things. So I'm gonna break this down regionally in a moment here, but few quick things I wanna highlight at a macro level. Number one, it's a flight to quality. Okay. Investors are putting heightened focus on the submarket, not just the MSA right now. And in fact, I'd argue submarket neighborhood matter more than ever now. Of course, they've always mattered. You know, real estate's local, local, local. But I think it's, you know, I think a lot of times in that last cycle we saw groups say, hey, I want to be in, you know, pick a market, I want to be in Dallas. And they may have ended up in a more economically challenged submarket, Dallas, because that's what, that's the deal that appeared to work at the time or that's the deal they could win the time. Now I think there's just a lot, the market's forcing more discipline in that regard where it's very submarket focused. Okay. Number two, price. Your submarkets, of course, are going to have a higher share of newer vintage apartments. That's, that's rather obvious, right? And so when you have more expensive submarkets, a lot of that's just newer properties that by nature of being newer typically tend to be more expensive. And where do newer, newer, more expensive properties get built? Well, they tend to be built disproportionately. So in more vibrant submarkets, have better proximity to jobs and retail, better schools, higher home prices and all the other things. Right. Older vintages tend to be concentrated, you know, broadly speaking, and especially in these growth markets where a lot of supplies have built, tend to be concentrated in more, you know, lower growth spots and maybe not have the same access to the same jobs and, and retail, etc. And of course the older ventures too. We've talked about this in the past. We know that there's been fewer transactions, older vintages because those buyers have to worry about things like capex issues, deferred maintenance, in some cases you have rent roll issues and all those things just add challenges to the acquisition. The third thing I'll mention here is the, the rewinding of cap rates. Okay. In the prior cycle we saw a lot of cap rate compression from A's to the C's, newer vintages to older vintages, as well as top submarkets to bottom sub markets. There wasn't a big discount for buying in the most challenged submarket versus the most premium submarket. Those gaps though are widening and I've mentioned this before, you know, my view is that it seems that the market has kind of found its footing for newer, vintage, better located deals. So better submarkets. You know, we've seen, depending where you are nationally, those deals are going to be, you know, mid fours to low fives for the most part. We've markets seem to have kind of done that price discovery. Now there's only so many deals are going to trade, but I'll show you that in a moment. That seems to be more or less established barring, you know, some other shock at some point. But I don't think we found the new normal yet for these lower tier lower rent submarkets and older vintage deals. And that seems to be reflected in the deal flow data I just walked you through. Buyers don't see discounts big enough yet to entice them back into these lower rent submarkets. That trend is especially pronounced in the higher supplied markets across the Sun Belt and, and the Mountain states. Those of you can see the screen. I've now got the same chart specific to the Sunbelt and Mountain markets as a group. High rent submarkets versus middle rent submarkets versus low rent submarkets. And again indexing sales volumes back to 2019. It shows us that we're 83% back in higher rent submarkets in terms of sales volumes. Capital into these markets by dollar amounts, 83% of the, of the capital that was deployed in 20 2019, we're at those, we're at 83% of those levels here in 2025 or not here in 25. Obviously last year 2025 for middle tier submarkets were 80% back. For those low rent areas, get this 55% of 2019 levels. And that could reflect just some, you know, busted value add deals that were bought at the peak in those spots and current owners trying to hold out for better pricing that, you know, may or may not arrive in a reasonably workable amount of time. All right, now let's zoom in. Okay, we looked at national, went to the Sunbelt and Mountain states. Now let's zoom in at the, at the largest market in terms of sales volumes and that is of course Dallas. Okay, Dallas has been the number one market for sales volumes for quite some time. And when we look at this one higher rent, some markets of Dallas sales volumes in 2025 came in actually above 2019 levels, slightly. So 104%. So 4% above 2019 levels. So let's call it basically the same. Okay? But then we look at those mid tier and lower rent submarkets. Sales volumes are just under 80% back compared to where they were in 2019. Okay. So that's a big gap. Again, capital is favoring the more desirable areas. This is, these are the areas where there's going to be more jobs and more amenities and all the things. Right. So for Dallas folks, this would include areas like Uptown Dallas, Oak Lawn East Dallas West Plano, Frisco, Las Colinas. What do all those things have in common? Well, they're a lot of jobs in those areas. Higher home prices, lots of great shopping, lots of great restaurants. All those things. Right. These are, these are, these are the hubs of Dallas and suburban Dallas. Okay, now for those of you familiar with Dallas, I know some of you might be thinking, you know, no, Jay, core capital is just not back to pre pandemic norms. I'm not buying that. No way. All right. And well, let me make this argument back to you. It may not feel that way because there's so much more product now in these locations because of all that construction. So it actually is true that sales dollars are back. Volumes, I should say are back to 2019 levels. But those dollars are now being spread across a great number of deals, especially because of all that new construction. So. So just because you own a property, certainly for the average owner, it means that the market is not as liquid as it. Dollar volume is essentially the same, but there's now a lot more competition for each dollar, if that makes sense. Okay, so again, and also just a reminder, we're talking about being back to 2019 levels, not back to 21, 22. We're still way, way below those peaks. Not even worth comparing to yet. It's going to be a while before we get back to that. And then if you can, you can see my screen, you can see that illustrated there. In some cases, we were, you know, 2 and a half, 3x what we were in 2019. I'm sorry, 21 and 22 or 2 and a half to three times what we were in 2019. Okay, so we're nowhere near that. All right, so there's the Sunbelt, the mountain markets. I've talked about Dallas. Enough of the Sunbelt. Let's go to the Midwest right now where it's a very different story. Okay, this chart is really interesting. So again, same thing. Looking at sales volumes index 2019 high rent some markets, mid to mid rent some markets, and low rent submarkets across all the Midwest. All three submarket rent tiers in 2025 had sales volumes above 2019 levels. It's the only region of the country where that's true. Okay. 156% of sales levels. I'm sorry, in 2025, sales volumes are 156% of what they were in 2019. They are in 24% of what they were in the middle tier product 100. I'm sorry, middle tier submarkets, 101% of where they were in lower rent, some markets. And by the way, I'm saying this is an index, right? It doesn't mean you're up 156%. It really means you're at 56%. But I'm showing that say anything above 100 means you're up above where we were in 2019. All right, so that reflects a couple of things about the Midwest. Number one, far less newly built product competing for capital as well as for renters, which then means better rent growth, better occupancy, etc. But also translate to less competition for capital. So number two, you have a lot of capital. Increasingly, it's interested in the Midwest and that steady Eddy story we've seen played out. And because there's less competition from all this new supply, it also means that capital has fewer options, especially for institutional grade multifamily. And so there's going to be more willingness to move down, you know, in terms of vintages and submarkets in these cases. Okay. And that's something we're talking more about with Jason Morgan today, as his company has been, again, maybe the biggest buyer in the Midwest these last five plus years. Someone asked Jason what's driven that shift for, for the Morgan properties into the Midwest and why he thinks that could be sustainable. So stay with us for that. We'll talk about that. Now, if you're curious about the Northeast and the west coast, the two other regions, here's that data. The Northeast has been a lot like the Midwest in a lot of ways. But in the Northeast, the capital's been more focused on high rent and middle rent submarkets. They're about 90% back to 2019 levels in both of those segments. But in the lower rent submarkets, it's just 64% back. And then the west coast, you know, this one's kind of a surprise, or maybe, maybe surprise, the wrong word. The west coast has always been unique. It has to Be independent. It beats to its own drum, does its own thing. And so on the west coast, the lower rent submarkets have actually seen the larger rebound in sales volumes, with 25th, 2025 volumes being 88% of what they were in 2019. And that compares to the higher rent and the middle rent submarkets, both around 75% of what they were in 2019. Okay, so it could be some unique drivers out there. All right, so anyway, that's what I had to share with you. High rent, middle rent, lower rent. You know, again, I think that barring a shock, I think that's going to continue. And I think it's where until we see greater discounting and more willingness to sell at those great discounts, we're probably going to see, you know, that trend continue to play out until we've kind of settled out of what that cap rate gap is going to be. What's the discount really? What's a sustainable discount going to be to draw more capital into these lower price, maybe less desirable locations? All right, with that, it's time to move on to rental housing trivia. All right, today's trivia question is presented by Authentic. If you've got a property that's underperforming, 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 on how to fix it. Listeners of the pod get 50% off. So head to authentic ff.com and click on the banner to learn more and claim the offer. Okay, so today's question is comparing 2015, 2019 versus 21 to 25. So basically, pre Covid 5 years versus since COVID last 5 years, no market has seen faster growth in apartment sales volumes among major MSAs than Miami. Okay, so Miami's the biggest growth in sales volumes over that period. But what market ranks second? Is it Columbus, Ohio? Is it Denver? Is Indianapolis, or is it Kansas City? Okay, so give some thought to what that might be and we'll answer that question in a bit. But first in the news. All right, in the news, when we cover headlines that impact the rental housing industry, both SFR and multifamily. A couple headlines for you this week. Number one comes from the Boston Herald that says poll finds support for rent control and tax cut issues could land before voters in November. Okay, so the article tells us the Bay State poll conducted by the University of New Hampshire Survey center found 56% of respondents these are Massachusetts potential voters or likely voters. 56% either somewhat or strongly support a proposed ballot question that would cap annual rent increases in most rental units to no more than 5% across the state. The poll found 17% of residents were neutral and 26% strongly or somewhat opposed. Okay, quick reminder. The proposed version of rent control in Massachusetts would be either CPI, which is inflation, or 5%, whichever is greater. So right now that would mean a 2.4% rent cap based on inflation, no matter your costs of the property. Right. And if inflation were to accelerate above 5%, you'd still be capped at 5%. And this would apply not just to renewing, to renewal leases, but also to new leases. There's no vacancy reset, so that's vacancy control. And the icing on the cake is that even though the ballot measure would occur in November, it would revert the base rent back to January of this year. And so that would be quite an accounting nightmare to work through. So we'll see how this plays out. Hopefully common sense science and data prevail. But I imagine this is basically has to be freezing all development starts and potential acquisitions in Massachusetts for 2026 until the outcome is decided. If you're still starting a project this year, please tell me how you're making this work, because I just don't know why development capital would take that risk until this, until after this ballot measure has been decided. All right, second headline comes from CBS News. It says, bipartisan bill aims to block big investors from buying single family homes. Okay. So this is the third major proposal we've seen come out to ban or sharply limit large investors in single family rentals. The first was from the White House. Then we had the Senate Democrats plan I mentioned last week, the Elizabeth Warren planned, and now a bipartisan proposal from Senator Hawley of Missouri and Senator Merkley of Oregon. Now, anytime we see the word bipartisan, and that's increasingly rare, that it does happen, so it gives us air of credibility to it. It's like, oh, it must be good, it's bipartisan. But let me say this. The crazy trains getting crowded. The entire premise of this bill is based on misinformation. And if you doubt me, I'm going to tell you why really quickly. Okay, so let's look at both of these senators said as a rationale for why they're supporting this bill. Okay? Senator Hawley, he said this. Families deserve to be able to buy their homes and achieve the American dream without competing with big investment companies that irrevocably drive up Housing prices. Okay, well that sounds nice. Or sounds scary, I should say. But is it true? That's an important question. Is it true? Well, let's fact check it. Freddie Mac research showed that at the height of the housing boom, housing price boom in 2022, they wrote this. They said, what may surprise you is that investors don't make our list of top drivers of home price growth. And end quote there. And nearly all research suggesting investors materially impact home prices. That's really based on what happened in the GFC era in the early 2010s when investors are buying up vacant homes out of foreclosure. It's a different era today. And the bill's other sponsor, Senator Merkley, said this. As corporate investors invade the housing market nationwide, we need, we need action to protect hardworking Americans achieving the dream of homeownership. Well, that sounds scary too, but is it true? So let's fact check it. Well, research from Harvard center for Housing Studies, from John Byrne's Research and Consulting and Redfin, they all show that we actually have fewer single family rental homes today than we had in 2016 because investors been selling more homes than they've been buying. And so there's not been any kind of invasion. As Senator Merkley said, it's been a retreat is a more honest word. Honestly, you know, it's been, they've been selling more than they've been buying. So, you know, the data should matter. We have more than a million fewer single family rental homes today than we had in 2016. And just also I should point out the US homeownership rate today, people think it's, it's really low. It's actually above the long term average. It's above the long term median. And if you exclude the subprime lending era of the 2000s, the long term average be 64.7% compared to where we are today at 65.7%. We're 100 basis points above that. So the reality is we do obviously have a severe housing affordability issue in the US but we can't solve that problem without correctly diagnosing the actual problem and banning. Investors can do nothing to solve the root issue, which of course is that most renters today simply can't qualify for a mortgage due to poor credit. They can't come up with the cash for a down payment and can't afford the more than $1,000 in additional monthly costs of owning a single family home versus renting one. So why don't we address the root issue, all right? And Then one thing, one more thing for you. We have our newest segment, Good News. And that's to highlight good news happening across multif family and single family rental rentals. Because there is a lot of good news happening too. There's a lot of bad news. Of course, we always get have to talk about those things. But the good news rarely gets enough attention. Good news is presented by friends at Apartment Life. Apartment Life coordinators help apartment owners care for residents by connecting them in meaningful relationships. And that in turn benefits everybody from the residents well being to the satisfaction of on site staff and the apartment community's bottom line. So if you're not already working with Apartment Life, check them out@apartmentlife.org it's a faith based nonprofit. It's been around for nearly three decades doing some great work. Okay, so this week's good news comes from a Freeman web community in Gallatin, Tennessee. And I tell you, I got, I feel honored to tell you this story. Okay, I'm going to tell you about a wonderful couple named Ken and Patty Sandell. They're retired, he's 83, she's 70. And after successful careers in insurance sales, they, you know, probably, I mean, I don't know this for sure, but I assume they probably could have lived nearly anywhere. But you know what they chose? They chose to live in a former Section 8 apartment community with high needs and to live there as Apartment Life coordinators. Pete Kelly at Apartment Life, he told me that when Ken and Patty first moved into this community nine months ago, the neighbors didn't know quite what to make of them. And whenever Ken and Patty would stop by, they'd knock on doors and check on them. At first people would just barely crack open their doors. But that didn't deter Ken and Patty. They kept coming, kept knocking, kept hosting events, kept hosting chili dinners. They've donated food, gift cards, groceries to families who are going through hard seasons. They've driven neighbors to doctor appointments. And when one neighbor lost their dog, Ken and Patty joined the search party and found help find that dog. And they're not just serving the residents. Ken and Patty serve the leasing and maintenance teams on site too, bringing donuts or Chick Fil A or candy to the leasing office, helping the maintenance team pick up trash. They're planning some summer events to help to help care for some of the children who live in this community as well. So what an amazing couple. And thank you, Ken and Patty, for all you do. And by the way, friendly reminder, if you have a good news story to share, email it to infoparsons.com and we may feature it on a future podcast podcast. All right, let's get back to today's trivia question presented By Authentic Comparing 2015 and 2019 levels to 21 and 2020 to 2125, no market has seen faster growth in apartment sales volumes among major MSAs than Miami. What market ranks second? Was it Columbus, Indianapolis, Denver or Kansas City? And the correct answer was Indianapolis. So Indianapolis is up 138% compared to the five years leading up to pre Covid compared to the last five 138% more sales. That is $1.2 billion that traded there just last year and that ranks 36th among US markets. All right, and next up, it's time for today's interview presented by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can help your property centralize operations and automate everyday tasks, visit funnelleleasing.com and one more reminder, I'm going to be speaking at the Funnel Forum this year. Mia Hamm will be there as well, the soccer legend. She's far cooler than me, so come out and see her. They're going to be conversations there on what's changing multifamily talk about AI centralization, the human side of operations. It's going to be at a five star resort from March 23rd to 26th in Scottsdale, Arizona. So check it out. Funnelleleasing.com forum okay. Our guest today was recently promoted to co CEO of the firm his father started back in the 1980s and grew from three apartment communities in southern I'm sorry, in suburban Philadelphia to Now the number two largest apartment owner in the country with more than 110,000 units across the country. At Morgan Properties, his father, Mitchell Morgan recently passed the reins to his sons Jonathan and Jason. And today we have the honor being joined by Jason Morgan to talk about the company as his father built. What might change under the new generation of leadership. What Morgan's buy box is today and they sure have been buying a lot. And also what's it like to be a co CEO with your brother. So here's my conversation with Jason. Foreign. Welcome to the interview portion of today's podcast and I am honored to welcome in Jason Morgan. Jason, thank you so much for being here today.
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Thrilled to be here, Jay. Great. Great to connect.
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A
Absolutely. So you know you're what I guess started us just a family business has grown and grown. You're now One of the biggest names in multifamily with a hundred thousand units. But for, you know, some people obviously know your story very well. But for those who aren't as familiar with the origin story, take us back to the, to 1985, when your dad started this business in Pennsylvania. Obviously just a table set a little bit. That's well before multifamily was really considered a mainstream investment class. And so tell us about the early days of the business, what your dad saw that inspired this early move into multifamily.
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B
Yeah, no, happy to do it. And my, my father's story is amazing. I mean, he came from absolutely nothing. He grew up in right outside of Philadelphia. And my, my grandfather, he owned shoe stores throughout Philadelphia or a couple throughout Philadelphia. And as my dad always would like to say, he had great sales experience, he had great marketing experience, but he did not have any business sense. And so you always saw, you know, the upside in a lot of things that, you know, he opens up a new shoe store and it's going to be successful, but he didn't have that business acumen. And my, my father saw my grandfather go bankrupt twice. And to this day, my, my dad will say, focus on the downside. The upside will take care of itself. So he came from nothing. He sold shoes to pay his way through Temple University as well as Temple Law School, and never practiced law, but he ended up working at an accounting firm for minimum wage. And then subsequently he went to work for a builder, home builder, who eventually went into multifamily building. And they actually built Kingswood, Brookside and Forge gate. 1400 units. That was the first apartment complex that we ever bought as a company and started Morgan Properties, and we still own those assets to this day. He ran, you know, he did acquisitions, dispositions. My dad was, you know, he's naturally curious. So whenever someone was buying something, you'd always talk to them, how are you financing it? How are you, you know, capitalizing the transaction? And he came to, you know, understand a tax exempt financing strategy that would allow you to finance conventional multifamily using tax exempt financing, which essentially allowed him to pay a lot more for Kingswood, Brookside and Forge Gate. And so he essentially was able to buy 1400 units between tax exempt financing and seller financing with a dollar down. And so he bought the portfolio, obviously overpaid at the time. And the only catch with the program, which went away in 1986, was that you had to renovate 100% of the units in the portfolio. And so he likes to say you know, he was in the rehab business before value add was even a thing. And so, you know, he was really bad at the first hundred units that he renovated and he got a lot better at the last 100 units. And since then, obviously, we've scaled to 110,000 units. But that's really what started the entire company.
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A
Yeah. That's amazing. Well, I imagine after, you know, 40 years, you probably had a chance to redo some of those initial renovations, so.
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B
That's right. Right. I will tell you, the asset still performs extremely well. It's, you know, it's a 1970s and 60s vintage and suburban Philadelphia. And you know, it's a testament to, you know, it's, it looks a lot similar to a lot of what we buy today.
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A
Yeah, well, I mean, obviously if you're in a good location, then you can make the rest work. I'm sure was just a little more about that period. So obviously you get to the, you know, late 80s, we had an early 90s. We had a lot of, you know, economic challenges. The, you know, the, the, the, the SNL crisis and whatnot did. But he was what, what, what kind of kept him in that business, allowed him to be, continue to be successful and ultimately grow it during a period where, you know, multifamily really didn't, nationally at least wasn't, didn't even do that great in the 90s. It really came about much later, like, well, what, what did he, what was he able to do to, to, to keep going at a time when a lot of others weren't?
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Yes, I, I think in general, you know, we, during the late, during all of the 90s, he brought in a lot of opportunity funds that he invested with, which again is similar to what we do today. You know, the, the partners look and feel a little bit different, but it was almost a, a evergreen style structure before evergreens became possible. So very flexible, long dated capital contrarian mindset of buying older properties. And he always likes to say he didn't want to be, you know, that old guy sitting around saying, oh, how could multifamily ever trade at this type of cap rate? You know, we got to sell everything. He was, you know, in the 90s and the early 2000s buying from all of those people. So yeah, it's really, I would say that contrarian mindset, that portfolio acquisition strategy has really stuck with us to this day.
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A
Yeah. And I want to get more into that in a little bit about how the strategy's evolved, if at all. But first I want to ask you, you know, you started with those three. It was three, right. Three properties in suburban Philadelphia. You're now at 110,000 units, is that right?
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B
That's right.
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A
So can you tell us a little bit about what the portfolio looks like today in terms of, you know, what markets or how many markets, states, asset types within multifamily that you're in a little detail?
- [34:44]
B
Sure. No, happy to. So today we own a portfolio of 110,000 units, which makes us the second largest owner of multifamily properties in the country. Half of that portfolio the Morgan family owns without joint venture partners. Half of that portfolio we own in separately managed accounts with institutional joint venture partners. It's, it's in 22 states, so all across the, the Northeast, Mid Atlantic, Midwest and Sunbelt. So it's definitely expanded quite a bit from, you know, originally being more of a regional player. So we're in, I think, you know, 80 plus MSAs. And you know, generally it's, it's, I would say on average most of the portfolio, 60s and 70s vintage. We do have some 2,000 and newer properties. It's probably about 20% of our portfolio, but you could characterize it as class B workforce housing. Average rents of, you know, fifteen hundred dollars across the board.
- [35:45]
A
Wow, that's great. So, and what drove that? How were you able. You mentioned evergreen strategy and some of the other, you know, the, the, the tax, advanced tax programs your dad was using. But talk to us more about how that, how you got to that, those type of numbers from three properties. 110,000 units. What was, what's your, how's your investor base helped support that growth? What is that investor base you mentioned? Institutional. Has it gotten more institutional over time?
- [36:11]
B
Sure, yeah. I would say our philosophy has remained very, very similar since those early days. Obviously the balance sheet has grown, thankfully. That's, that kind of supports that strategy. But having that flexibility, owning the multifamily asset class, it never really made sense for us to have, you know, kind of that fund fashion that had a gun to your head to buy or to sell it in opportune times.
- [36:36]
A
Yeah.
- [36:36]
B
And really structuring, you know, the mandate in the buy box that has, you know, the ability to hold, you know, much longer and be much quicker, much more quick and nimble around. That has really set us up for success because when we buy an asset, you know, we underwrite it better than the seller. We underwrite the right capital plan. We want to know that we know the asset incredibly well and set us up not for the next two years or five years, but for the next 10. And so it's a very different mindset. You know, I would say there's a few things that kind of are core to the strategy. One, as I mentioned, flexible capital that has long term tendencies. We've always been a portfolio buyer, even really since those earlier days. You know, we bought the entire portfolio from Charlie and Jared Kushner. We bought a large portfolio out of, you know, right outside of COVID and then a handful of other ones. But we've always been a larger portfolio buyer. That has allowed us to kind of lean into things that other people would shy away from. And I'm, we'll talk, I'm sure, about a few transactions we bought in the last year that had those tendencies. But you know, buying a portfolio across, you know, five or 10 states, like, we like that, a lot of people don't. And buying a one off asset that's a hundred million dollars larger assets, a lot of people don't want to put in, you know, 30, 40, 50 plus million dollars into one asset. We do. So it again allows us to buy stuff at probably more attractive pricing. And then, you know, the last ones I would say is, you know, we want to. We're very focused on discount to replacement costs, buying at a very, you know, low basis. You know, that's why we've, you know, stuck to class B multifamily and leaning into complexity. So I like to say that we are buying a very simple asset class, but doesn't mean we can't think through complex structures or complex portfolio acquisition strategies. We like that. We lean into it and it's a way for us to really scale. So in terms of, you know, our partners, like I mentioned to you before, 110,000 units, half with partners, half without, all on those SMAs, we invest about 15 to 25% of a given transaction and bring in a partner for the balance. Those partnerships thankfully have gone on, some of which have gone on over decades. And so it really is a testament to the mutual respect we have for both our joint venture partners that are very institutional in size and scale and what they have for us. The other thing I would say that also is pretty unique, which thankfully we're in the situation we're in today, we can do every transaction utilizing the Morgan family balance sheet as 100% of the equity. We choose not to. And we bring in joint venture partners on a rotationary basis and it allows us to, while, you know, we stick to our knitting, we like to say, and no multifamily we're multifamily experts, but we're able to leverage off of institutional partners and their perspective that goes multiple, multiple asset classes, international, national. And so it allows us where, you know, we, we, we're big partner believers. We like where one plus one equals three. And it allows us to really, you know, you know, we've had a, probably one of the best track records in the industry and I think that partner mentality, you know, really lends itself to that.
- [39:57]
A
Oh, absolutely. Obviously a great reputation in the industry. So, and one more follow up question that do you all sell much? And if so, I mean, because obviously you've built this portfolio over time. You still have some of your initial properties. What do you sell much at all? And if so like what, what, what, what type of deals would you actually want to sell as opposed to keep keeping your portfolio?
- [40:15]
B
Yeah, I would say selling is definitely become more of a, of a, of a constant. We, you know, we're generally, I would say, you know, 80% of the core long term oriented at the end of the day at 110,000 units, when you're pruning, it actually is meaningful. And so we are selling a good amount from time to time. It depends on the situation. There are certainly assets that we'd love to own and our operations team would love to own for 20, 30 plus years. But based on the strategy of the deal, it was buying 10, selling some nicer and newer assets for accretive pricing and holding the balance. And then there's sometimes that we have partners that want to liquidate and other times that, you know, assets that are just a little bit too small for us to really squeeze out the operational efficiencies around it. So it really, I would say selling has definitely become more of a strategy for us as of late. But the core is having the flexibility to hold long term.
- [41:11]
A
Yeah. And obviously a lot of groups out there that wish they had your flexibility right now. So you mentioned a few big portfolio acquisitions. Let's talk about some of these. In the last year or so, dream residential, REIT trilogy, real estate group combined, I believe about 6,400 units. What did you see in those portfolios that inspired Morgan Properties to be, you know, really a big buyer at a time when we just haven't seen a lot of trades of that size.
- [41:41]
B
Sure. So last year in General, we bought 14,000 units across a billion and a half worth of real estate. So definitely very active. I would say you've mentioned a couple of the portfolios that we bought in the Last year and they're kind of paramount to like what we are trying to buy in different ways. So like Trilogy had some nicer and newer as well as value add mixed in, you know, all in one. It was actually pretty complex because it was 11 assets across eight states. And so again like, you know, it's not going to cater to regional player that wants into one of those states, is not going to cater to as much of a national player because it's just a little bit cumbersome. Like we love that some of the assets we were in, you know, in those markets, some we were entering for the first time. We love to enter with the portfolio acquisition and then grow it from there. St. Louis as an example, hadn't been in there. We had one property in Louisville. This added to that mix. We weren't in Grand Rapids, Michigan. Now we are and want to grow there. Columbus, Ohio, been in there since 2019. Love that market and we're able to buy in that, in that as well. But it was, you know, it wasn't for everyone. It also had a very challenging, you know, assumption that we had to assume wasn't your typical, you know, kind of asset level assumption. We had a large fanny facility across between two of these, you know, two Fannie facilities that we had to assume. We had to add assets to it, we had to subtract assets to it. And so if anyone's done with any agency financing, it's not that easy and then adding on facility financing, it's even more complicated. So we love that complexity and we were able to get a 4% financed portfolio at a really attractive 6 plus percent cap rate. So we lean into that. And then Dream is another great example of that. It's a Canadian reit went public, you know, at a time where values were sky high, too small to be public. You know, the, the equity didn't really give them the amount of cash they needed to go on offense on the ROI side. And they were in markets we liked. So Ohio, parts of Dallas, Oklahoma City, which is a new market for us and again we were able to buy it for north of a 6 cap, finance it extremely attractively. And you know, it was kind of plug and play. You know, we're big in the markets in the Midwest. We knew the value add story was going to drive and do well there. And they spent a little bit of dollars but they couldn't obviously spend enough. So you know, it's an easy value add story for that portfolio. And it was too small, I would say for the Blackstones and the Starwoods of the world to pursue. So too big for any regional and too small for Starwood and Blackstone and some of those other opportunity funds. That's kind of where we play.
- [44:36]
A
Yeah, no, that's a great, great niche for sure. So you talk about, you mentioned the Midwest several times. Let's talk more about that. Obviously I think people listening to this podcast know the Midwest has been the steady eddy these recent, these past, you know, five plus years compared to the volatility we've seen on the coast through Covid and the Sunbelt through the supply boom. Obviously Morgan's made some big moves into the Midwest these last few years. So what drew to the Midwest and what do you as we look forward to the future because obviously you're making longer term investments. Why do you think it has this real staying power to be attract over the long term?
- [45:15]
B
Yeah, it's funny. I'm happy to talk about the Midwest. I, I hope your viewers, I know you have a big audience don't see this and start investing in the Midwest because we love the fact that there's no, there's no competition out there, no institutional demand. The reefs don't like it. And that is just fine from our perspective. So you know, people can continue to be excited about you know, the Carolinas and you know, Florida. You know, we're excited about Cincy, we're excited about Dayton. You know, those are the markets that we think are actually very compelling from a rent growth perspective. And you know, there's not as much competition. So we actually had no presence in the Midwest in prior, in about 2019 and now we own 19,000 units in the Midwest. So it's definitely been very, very strategic. The other market, I would say that again, you know, I don't want people to look into because we love it so much is you know we own about 17,000 units in upstate New York as well, which also operates very similarly I would say to the Midwest. Good rent growth, good demographics trends, diversified employment, no new supply, no institutional competition. And so it's been an area for growth. You'll see us continue to buy, you know, throughout the Midwest. You know there's what I said there wasn't a lot of new supply. But they also the cost to build in the Midwest is higher than the cost to build in the Sunbelt. And so essentially what that, you know, and as the other the coupling effect is the cap rates and the price per pound. You know, the cap rates are higher, the price per pound is lower. And like I said, we are Value buyers at Morgan Properties. So you know, the Midwest we're able to buy at 100,000 a unit and be at a 50 plus percent discounts and replacement costs. Whereas the Sunbelt you're buying, you know, at a much higher percentage of replacement costs. It's much easier to build and that's where everyone's building. And so, you know, we continue to be big buyers of that. I know that, you know, there's been a ton of capital chasing kind of core plus, you know, in the Sun Belt, we're happy to continue to be buyers in the, in the Midwest and buy kind of that older properties that seemingly have less competition.
- [47:32]
A
Oh yeah, that makes a ton of sense. And I've, I've, I've certainly been a cheerleader for the Midwest of late last few years. But I'm curious, you know, when most, most groups like, I think one of the challenges most groups have is you, you go to your investor base, you go to the investment committee and typically they're asking about things like, you know, the job growth, the income growth, the population, young adults and migration. The Midwest markets, you know, they're not going to stand out for those type of metrics. Obviously though, those aren't the only metrics that matter. So when you look at, you mentioned places like, you know, Dayton, Cincinnati, St. Louis, upstate New York. When you look at these types of markets, like, obviously just looking at, you know, job growth alone isn't going to tell the story. So what type of metrics do you look for that say, hey, we can, we can have success here?
- [48:17]
B
Yeah, I think you have to look at job growth as a, you know, component of the amount of new supply that's coming to the market. So because I think that at the end of the day, supply is the biggest, you know, leading factor of what rent growth is going to be. And in places like upstate New York and places like, you know, suburban Philadelphia and places like the Midwest, it hasn't had that supply dynamic. The other thing that we're looking at is, is not just, you know, job growth, but diversified job growth. We really want the markets to be pretty diversified, not levered to one, you know, employment driver. That's really going to be problematic in the future. And if you have this kind of steady eddy, you know, dynamic in the Midwest and parts of the Northeast, without that new supply wave, that's where we're going to be able to see good market rent growth.
- [49:07]
A
Growth.
- [49:07]
B
The other aspect that I think is, is lost on people. It's not just the market rent growth which is obviously a component. You know, we are value add investors and so we want to make sure that the affordability is still in those markets. The Midwest and upstate New York are fairly affordable markets for, for, you know, for residents. And so we want to make sure that if we're going to be entering into a value add story, upgrading the kitchens and the bathrooms and installing washer dryers throughout these apartment complexes, the markets can support it. And in an affordable, more affordable market like parts of the Midwest, it absolutely can. But it doesn't have that, you know, kind of competition that are going to compete for that newer and nicer, you know, units after the value add is kind of executed. So I would say, you know, you got to look at the drivers of jobs, you got to look at the diversification of those jobs. And then the final component is we're very much focused on corp. You know, call it value. You know, our rents for one bedrooms, two bedrooms and three bedrooms compared to class A comps. And we want to have that 500, 500 delta between those on a. On a unit by unit basis. So if we're entering into a value add story, adding 150, 200in premiums, we're never really infringing on those class A rents.
- [50:23]
A
Got me? Absolutely. So I want to ask you a question. You and I had an exchange about older properties and you guys have had tremendous success there. I want to run a theory by you and you, you please tell me, what if I'm wrong? Okay, so my, my thesis is that I think when you're looking at these older vintage deals in the Midwest and the, you know, upstate New York, suburban Philadelphia, as you mentioned, there's so little supply, not just recently, but going back decades, that there's. There's just not a lot of competition. There's not a lot of options for renters. There's not a lot of institutional quality deals. You go to a lot of, you know, the, some of the Sunbelt markets, they've been building a lot. And I think in particular, my, my. Again, you tell me you know better than me. You see these deals real time. Like, my theory would be that if you're in a particularly an economically challenged submarket in a place like even a good market like a Dallas and Atlanta, etcetera, you know, those 70s vintage deals may not be as attractive because there's more competition, there's more new supply, there's affordability in the B and A assets is still pretty good. And so they may not be as attractive as they are in a Cincinnati Is that a fair statement or if you disagree, please tell me.
- [51:36]
B
No, I think that's, I think that's valid. I think it really comes down to buying an infill locations. So I would say the class B asset in a great infill location of Dallas is different than if it's in the outskirts, because that, I think it is going to compete with a lot of the newer new adventure stuff. But you know, if you're buying in good locations that are infill, I think that's been the key to our strategy because if you think about where they're building class A properties, it's anywhere they can get land cheap and it's usually pretty far out. And so if we're, you know, counteracting that they're buying older communities in good infill locations, you know, we can execute on a value add story and actually compete with that class A that's, you know, very far out in the outskirts. So I think that's right. I think that's. That historical lens is probably important for the, so that some of those Midwest markets.
- [52:30]
A
Yeah, that's a good point. I mean, obviously at the end of the day in real estate, the old expression, it's local, local, local. And, and I think that location matters obviously a heck of a lot more even than the, the vintage because you could always improve the property like you guys have through value add. So let me ask you another location question. And obviously you, you've had a good presence. You mentioned infill, but seems wrong, mostly suburban infill. On the flip side, we've seen a lot of increased regulatory challenges in a segment that had been very institutionally favored. And that's more urban locations. And in particularly areas, we've seen increased regulatory risk in some of these coastal markets. DC's Maryland suburbs, Montgomery county in New. Obviously, you know, now in St. Paul, Minnesota, we've seen rent control parts of New York outside the city. Now other states like Massachusetts are now considering it. And so when you look at these types of markets where you have, you know, more increased regulatory risks, you have rent control, how does that factor into your investment strategy? And would you even consider potential investments in those markets?
- [53:42]
B
Yeah, it's a great question. And it has to factor into your investment strategy because it's a real risk. And just to kind of level set 110,000 units, we probably have 20% of our portfolio in the Maryland DC corridor. We were unbelievably active pre Covid in those markets as regulatory challenges have been there. We haven't been very active on the buy side in those markets. We still like the assets we own, but it hasn't made sense to be growing and expanding in that Maryland D.C. corridor unless there was a cap rate reset. And the only, you know, I mean, they might bring us back into those markets because if cap rates widened so significantly, which they're starting to in places like Minnesota and, and Maryland D.C. corridor because of those regulatory challenges, that's the only thing that's going to drive people back in. But that's, that's problematic to what they're really intending. They want groups to come in and improve these properties like we do and invest in the long haul, and they're really dissuading us from entering into those markets. So it's a real risk. I am, I am at least pleased to see that some politicians on both sides of the aisle are starting to really, you know, lean into building more multifamily properties and affordable properties, because that's really the only way that we're going to solve the affordability issue in this country. You know, the governor owned Helm State. Josh Shapiro just went out and said that they need to change the zoning laws, they need to make it more streamlined, they need to make it easier to build more multifamily, because there's a lot of NIMBYism that's out there and people don't want to build. And then when they want to, they want to get votes, they just throw on rent control, and that doesn't solve the problem. So I'm very, I'm at least encouraged that Governor Shapiro and others are really saying we need to change the narrative and change the situation and build more multifamily, because that's going to lead to rents, you know, declining. And I actually think a great, you know, case study of it all is just look at the Sunbelt. I mean, the Sunbelt has had negative rents across the board, Class A, class B, class C. And it's because they built so much multifamily properties throughout the Sunbelt. And candidly, if they do that everywhere in this country, it's a guarantee rents will decline. So if you really want more affordability in this country, you need to build more. And, you know, I'm hopeful that some, some of the politicians on both sides of the aisle see that and are starting to see that. But it's certainly something that is a factor in where we're going to grow and, and expand our portfolio, because rent control hasn't been helpful. But it's also some of the other aspects that are making it hard to do business in some of these markets, even beyond rent control. That factor into where we want to be buying?
- [56:33]
A
Oh yeah. I mean the number of other things we don't get talked about as much but you know, screening limitations and obviously issues with unpaid rent, etc. Those all matter as well. But yeah, very well said. It obviously is about supply at the end of the day. So speaking of supply, I've talked a little bit the Sun Belt and you obviously have some presence there. I know even more focus on expansion in the Midwest of late. But what, what's your take on the Sunbelt right now and what would it take for y' all to, you know, look to be more active there again?
- [57:02]
B
Sure. At the end of the day, like I said, you know, we're, we like to be contrarian, so we are, we love the Midwest. Would we enter the Sunbelt in select markets? Absolutely, if the pricing was there. And it's really going to be a pricing dependent exercise. And you know, the Midwest is, I'm sorry, the Sun Belt is still challenged. I know that the REITs are putting on an optimistic face, but at the end of the day, if you look at their projected NOI growth across their portfolio, it's negative. We've outperformed the REITs by double in terms of NOI growth over the last three years because we have a diversified portfolio and kind of these classroom markets across the Northeast and the Midwest. But the Sun Belt has and we'll continue to see some challenges on the rent growth side because just because you're over the curve of supply, that decline is still there. And what's actually surprising to me is that they're already starting to see some more starts and in those markets because that's where people want to be. People want to build in the Sun Belt. So a lot of the buyers, we're going to buy the core plus stuff in the Sun Belt and then we're going to churn that rent roll to make the numbers work. I'd think twice.
- [58:16]
A
Yeah, no, it makes sense. But in fairness of the REITs, like even the coastal REITs have negative NOI expectations for this year. So that's impressive that you guys are, are, are standing out there and certainly speaks to the value of the, of the, the less loved Midwest and, and, and Northeast markets for sure. And, and, and the success you're having there. So as you think about further growth, is it more of this, you still focus on Midwest, Northeast or what markets and asset types within multifamily really stand out right now or what's your buy box?
- [58:52]
B
Sure. It's definitely going to be a lot more of the same until people listen to this podcast and start investing in, you know, the Midwest and the Northeast. Because again, like I said, we love, we love the fact that people are, you know, going into Core plus and they can have it. So the Midwest markets where our data will tell us that we're able to, there's a good amount of transaction velocity. We don't want to enter a market that we can't scale. We need to enter a market that's going to have that churn of transaction velocity. So good markets that are going to have that transaction velocity where we know that we see that the value add story works based on our own portfolio or the data that kind of is at our fingertips. So that's going to be in the Midwest. In these non sexy markets, it's going to be in the Northeast. With the one caveat being we didn't have a big portfolio in upstate New York until a big portfolio became available that was contrarian in nature and we love to be contrarian. And so if a big portfolio that was in distress in the Sunbelt made sense from a pricing perspective, it would bring us back. But right now the data is really showing us to lean into the Cincis, the Akron's, the Saint Louis's, the Kansas City, you know those markets. Columbus is fantastic, but a little, getting a little pricey. But you know, those are the markets we really want to be growing in.
- [60:15]
A
The upstate New. That was the other Morgan, right? The.
- [60:18]
B
That's right.
- [60:18]
A
Yeah.
- [60:19]
B
We bought no affiliation, but we bought a portfolio from Morgan Communities in upstate New York that was in a good amount of distress at the time and we ended up buying it. It was incredibly complicated, but it's been one of the best performing portfolios that we bought in a very non sexy, non institutional market. NOI growth has been extremely compelling. It didn't see that massive pop that the Sun Belt did. It's all a decent pop, but not a massive pop. But we've continued to get good NOI
- [60:50]
A
growth steps and the added benefit of eliminating confusion between Morgan Properties and Morgan Communities. Right?
- [60:56]
B
Exactly, exactly.
- [60:58]
A
I got to ask one more question about this though. So why do you. We've kind of joked a little bit about the, you know, bringing more attention in the Midwest and I've, I've heard that this is, you're not the first person to say this, but at the end of the day, a lot of investors, especially institutional, like even if they go to Columbus, they're looking at class A, they want to be near the university. They're not probably doing the same things you're doing. So I'm curious, like, why do you think, I mean, as much success as you guys have had, like, like what's, why do other groups, why are they challenged to be looking at, you know, 6070s, 80s vintage deals in Midwest and Northeast markets? Like what, like what are, like what do you, what do you think their stumbling block is? To not seeing what you see?
- [61:42]
B
Yeah. So a lot of investors, you know, kind of go with the crowds. And this is a key theme across the entire board. You know, we are contrarian in nature, but I think it's a broader issue and it really comes down to where their capital is easiest to raise. And that goes for the syndicators as well as the most institutional names in real estate. Everyone is chasing Core plus today and that's solely because there is a ton of capital to be raised in that Core plus bucket. People moved away from office and in parts of data in other industrial markets that became softer and they want to get into multifamily. And so there's a ton of capital that's moved away from those asset classes that are kind of the forgotten ones into multi as a food group mentality. And they want to do it. But do they want to buy, you know, class B and C properties or the nice shiny new class A properties? And so it is very easy to raise class A cap or, you know, Core plus capital today. And we have the ability to buy at a very discount to replacement cost, not say we need to sell it in two years. So what are we going to be able to easiest to sell? And we're going to see better rent growth, much better financing because of the agencies. And those are the assets that actually have performed better through market dislocation since the 90s versus core plus brand new construction assets that are actually much more volatile in nature. So, you know, just to put it in perspective, all the deals we're buying are north of a 6% cap rate, you know, six and a half percent cap rate. And we're able to, through the value add story, bring that up 100 plus basis points, you know, on a fully loaded basis. You know, contrast that with where investors are buying Core plus at 5 and 4% cap rates, you know, and then hoping that they're going to churn the rent roll and be able to actually get out alive. But where are they buying Core Plus? They can only buy in markets that are really building all of the Core plus which is naturally the Sun Belt. And so those are the markets that are actually having a lot of rent growth challenges. They're going to see new development coming online. And so I wouldn't be certain that you're actually going to turn that rent roll and you know, and get out alive. I actually think it's a lot riskier today to be buying the core plus stuff at 475 in markets that are still challenged and are going to be still challenged for the next two years than buying our stuff at a 150 to 200 basis points, you know, spread benefit at a very, you know, attractive, you know, all in basis.
- [64:25]
A
Well, your point reminds me to funny story. Kind of not really a story, but a comment that over the years I've had a chance to speak to different investor groups and maybe other LP investors. And whenever I've in the past, especially prior to past couple of years, I'd go to places like Cleveland and Milwaukee, Chicago, Indianapolis, et cetera. And these groups are wanting to, they're, they're, they're, they're buying in the Sunbelt, building in the Sunbelt and raising money in the Midwest. And I'll ask them several times I've asked, I say hey, why don't you invest in your back? Why don't you invest in Milwaukee, why don't you invest in Ohio? And the answer is like our investors, they like living here. They don't like, like investing here. They like, they see the growth over there. And I thought that was really interesting. It's just that even, and I'm just speaking a handful of groups of course in this case, but that even within these markets like there's not a belief sometimes that like the investors want to go where the growth is and maybe they're missing out on something. To your point.
- [65:22]
B
No, I think they, I think they certainly are. I'm happy for them to continue to miss the, miss the joke. We'll, we'll continue to be, you know, be big buyers of that. I think it eventually does shift. I think that is an interesting dynamic. What happened in 21 and 22 and people are overcorrected. The tides and the GVAs of the world that we're buying at incredibly tight spreads in these challenging Sunbelt markets for class C properties. You know, obviously there was a correction there and pricing has come back to earth and now people are painting with a very broad brush. You know, all, all workforce housing is tides and then there's class A and so they're naturally just overcorrecting and leaning into that and our portfolio didn't, you know, do that. We actually, you know, you know, there's a big, you know, market out there that people are missing because they're painting with a very broad brush that all class B and C properties are the same and they're very, they operate very fundamentally differently.
- [66:30]
A
Yeah, no, I agree. And again, I think even in the, some of these Sunbelt markets, like the local, like these class C properties are good locations, are ultimately going to. You're being the cheapest thing in a good spot is, isn't a bad strategy versus being in a really rough area economically. One last question before I let you go, Jason. Obviously we, I probably should have led with this, but obviously there's been a big transition of leadership from your dad to you and your brother Jonathan with that transition. It doesn't sound like a lot's changing because you, you've. The core strategy your dad had is much of what you're still talking about. But is anything, what, if anything is changing in terms of how you guys do business, investment, operations, et cetera?
- [67:12]
B
Sure. Yeah. No. So it's, it's definitely a big honor. We obviously, John and I have big shoes to fill. You know, our father is the epitome of the American dream and we take a lot of the entrepreneurial spirit that started our company and still utilize it obviously today in our country, in our, in our culture. But not a ton has. Is changing from our perspective. John and I are co CEOs of the business. We are, you know, excellent partners. We complement each other extremely well. We also made some C suite changes that allow us to delegate further as well and put the ball in the, in the hands of our leaders of our company and set us up for kind of the next phase of growth. We're always focused on how do we scale but do it thoughtfully. So at a 110,000 units, we need to be thinking of and staffing our company and our management company like we're at 150,000 units. That's the only way we're going to be able to grow and absorb that inevitable scale today. The only thing I would say that is different is, you know, we have a big platform and we're always constantly thinking about how do we leverage our core platform into adjacency. So back in 2017, we expanded as a capital provider. We now offer, you know, bridge financing, preferred equity, and we invest in CMBS securities as well. We've deployed over two and a half billion dollars into equity Two and a half billion dollars of equity into various credit strategies. We're going to continue to lean into that. We're going to continue to lean into anything kind of multi family adjacent but do it in a very thoughtful way that leverages kind of our, our, our data and the fact that we're not just going to be a flow buyer of multifamily, we're going to continue to generate alpha but do it by leveraging off of our core platform. So we're definitely, we're similar but different I would say. And I think we're set up for, for tremendous growth and, and expansion. That's, that's to come. So I like to say, you know, today, in five years from now we should be still have that same DNA but look fundamentally different in five years from now because we obviously look fundamentally different than we did, you know, five years ago.
- [69:24]
A
And, and what's it like to be a co CEO with your brother, guy you grew up with and now doing business with every day?
- [69:30]
B
It's, I mean it's great. Our, our father always talks about how like if we didn't, if we weren't brothers, you know, there would be no doubt, you know, with the brotherly love there's always inevitable competition and, and fun. But to be perfectly honest, like, we really don't have that. Like John and I, you know, we were different personalities. We, we complement each other incredibly well. We both want to grow and expand and, and redefine the multifamily sector, lean into affordability because we are the biggest provider of affordable, basically natural affordability in this country. And we're a renter nation today. And so we very much are on the same wavelength on that. We complement each other very well and we look at a problem fundamentally differently. And so it actually is pretty interesting when we're looking at a new opportunity, new acquisition or a new platform to invest in. If he likes it and I like it, we often will like it for fundamentally different reasons and then gain conviction around that together because we both like an opportunity. And similarly, if I don't like something and push back or he doesn't like something and I do, we gain a lot of like conviction and confidence because you know, we've obviously, you know, I've known him my entire life, so we have a built in kind of confidence level, but also really a trust that's, that's there, that's built on decades of, of experience working together. And so it's been working out great.
- [70:57]
A
Well, that's awesome. Well, congrats to you and your brother and your dad, of course, your whole family and the business, all the success you've had. And thank you for coming on the podcast and hope you have a great rest of 2026 as well.
- [71:08]
B
Thrilled to do it. No, happy to be here. Thanks so much for the time.
- [71:33]
A
And that's wrap for episode number 74. Big thank you to Jason for being our guest today. Thank you to jpi, Madera, Funnel, Mason, Joseph, and Authentic 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. Sa.