Invest InlandNW: April 2024

To start the year we've helped 42 Inland Northwest multifamily owners and developers deep dive into all things asset management, across 2,576 units and $317M in assets. We're sharing best practices and lessons from this activity, plus the $1B+ in assets we've worked on over the last few years.

OVERALL MARKET

FIGHTING THE FED

Consistent with February, there were more mixed signals across the economy this month.

• The Fed's goal is to reduce inflation without crashing the economy. They appeared to be on track early this year, but mixed signals continue.
• March inflation data came in higher than anticipated. Q1 jobs reports signaled robust employment. This means the Fed may need to hold rates higher for longer.
• Markets have been expecting rate cuts, so this data spooked investors. The benchmark treasury went from ~4.0% to 4.5% this week.

WHAT THIS MEANS FOR YOU

• The 10-year treasury has moved up or down 0.2% seven times since December, hovering between 4.4% and 3.9%. This is a lot of volatility.
• So long as the treasury doesn't soar above ~4.5%, most investors are ready to move forward in today's market.

YOUR ADVISORY CORNER

While the market fluctuates, we are focused on what we can control: Managing your existing assets in today's market conditions.

• Asset management is the overseeing of all things property investing from high-level strategy to day-to-day operations, distinct from property management.
• When we tune out the noise, asset management is about maximizing the value of the assets you already own.
• For multifamily investors, that means optimizing income, finding efficiency in operating expenses, weighing the return of equity over time, and executing asset-level business plans.

GO DEEPER

• Existing Owner: Do you have a property business plan? Do you know what your investing goal is and do you have a plan to meet it?
• Investor: Are you a high-quality operator who can run assets more efficiently than existing owners? There are opportunities to invest today that provide outsized returns simply through asset management strategies.
• Seller: Are you doing the 2-3 things today that will maximize sale value in the near-term? Our experience in the local market can make all the difference.
• Developer: Do you have a lease-up and asset management strategy in place 6-12 months prior to construction wrapping up? We're no longer in a "build it and they will come" market.
• Property Manager: Do your clients have a property business plan? Without one, it's like driving in the fog.

DEVELOPER'S CORNER

ZOOM OUT

Today's market is one of the most competitive leasing markets the Inland Northwest has seen.

• Some submarkets have seen major supply expansion, contributing to more near-term supply than demand.
• Leasing concessions range from 3-6 weeks of free rent. Digital advertising costs have increased to capture tenant attention.
• With fierce competition, asset management during lease-up is more important than ever.

ZOOM IN

• For a developer, the goal is typically a speedy lease-up at market rates in order to refinance or sell for maximum value.
• The work between finishing construction to fully leased is crucial to achieving development goals.

NEW CONSTRUCTION ASSET MANAGEMENT

Our team is now offering a New Construction Asset Management service, which includes:

• Weekly engagement with all property-level teams to ensure execution of best practices.
• Ongoing input on day-to-day decisions through the lens of: Will this maximize value?
• Best practices revolve around: executing a flawless lease-up, implementing creative incentives and grassroots marketing, managing ongoing operations, and hiring and incentivizing property management.

MULTIFAMILY BREAKDOWN

ASSET MANAGEMENT BY GOAL

Your ownership goals likely vary. Your goals may look like:

• Cash Flow: Maximize cash flow over the next 5+ years. Tactics: ensure rents reach close to top of market, minimize vacancy and turnover costs by allowing renewals slightly below market, identify looming deferred maintenance.
• Simplicity: Own and operate with as little time as possible while generating reasonable returns. Tactics: audit portfolio for simplicity, own newer construction vs. aging assets, ensure best property management team in place.
• Maximize Equity: Maximize asset value for refinance or sale. Tactics: achieve top-of-market rents, identify creative other income (parking, laundry, pet fees, utility reimbursement), maintain lean operating expenses for 6 months prior to any event.

If you're not accustomed to viewing your properties through the lens of asset management, we recommend working with our team to complete our Property Business Plan and sharing your investing goal with your property management team.