Latest / The On The Rise Podcast / Why We Keep Buying Apartments When Others Are Quitting - Bonus Episode With Zach Haptonstall
Transcript
- Rise48 Equity: The following bonus episode is taken from the Rise 48 Equity YouTube channel. Rise48 Equity posts a variety of educational and informational content on multifamily investing, as well as a weekly Rise report that keeps you up to date on the latest news in the Sunbelt market. Check out our channel using the link in the description. I'm Jason Kish. I'm the Capital Formation Manager at Rise48 Equity. And I'm sitting down with our CEO, Zach Haptenstall. I just had a couple questions for you, Zach. Yeah, absolutely. You know, really the big one right now is with all the challenges that other operators have been facing, and you know, ultimately some of them have just given up, threw in the towel, or can't operate anymore, how have you continued operating through that? Yeah, I mean it's it's been tough for sure. I mean, we're kind of stuck in multifamily purgatory the last four years or so, but it's been a number of factors. I mean, the biggest thing truly is our team and our infrastructure. I think that we've just continued to stick together and support each other operationally, accounting, marketing across all the departments to just keep going. You know what I mean? It could be easy. A lot of our peers have have had to give back deals or kind of put their head in the scene and go into hiding, and we just haven't done that. So we've just kind of been in attack mode. You know, playing offense and defense, but I really do think it's the team, ⁓ it's the leadership team, it's it's the on-site staff just being loyal and sticking together because when things don't go well, it's easy to point fingers, you know what I mean? And we haven't done that. And so, you know, it sounds cliche and there's a number of factors, but that's one of the biggest things is just the team sticking together through the adversity. In a way, it's been easier for a lot of these operators to just give back the properties, hasn't it? Yeah, I think that like economically it probably makes more sense for a lot of them to give the properties back for the sponsors themselves. You know, we've continued to support deals out of our own pocket at the ownership level that we bought at the end of 21, early 2022, you know, right before interest rates skyrocketed because we believe in the deals, we believe in the markets that we're in, and we want to protect our investor capital. Cause you look at this as we have a 50-year runway from here. We're not just here to, you know, flip a couple of apartments and be done. We're trying to build a real organization that will be around for decades. And I think that's that's the difference between the groups that you can see are still fighting ⁓ to, you know, preserve investor capital versus groups that, you know, maybe are gonna close down their shop, rebrand and and do something else. So along those same lines, why do you keep buying into this market? Yeah, I mean honestly, we think there's great opportunities out there right now. Right. And so, I mean, there's everybody's heard that cliche saying from Warren Buffett, right? When there's blood in the streets, ⁓ is when you should kind of, you know, pounce on it. When people are fearful is when you should really, you know, attack. And and that's what we think is that we're buying deals for the loan amount below the loan amounts of some of these sellers at great basis, great cap rates. And we look at, you know, who knows what will happen with interest rates. We can't speculate on that, you know, we don't even try to anymore. Right. I'm naturally pessimistic about interest rates ⁓ over the over the years from what's happened, but We look at what can we control and predict, and that's the supply and construction pipeline of new deliveries. And that's concrete data that's showing that 2027 through 2031, we should hopefully have tailwinds. And so we think if we're buying deals right now at a good basis, we believe in multifamily. You know, people need places to live, the fundamentals are strong. And so if we can find good deals, we want to be acquiring those. But with that said, it's very challenging to find good deals, especially in this capital markets environment. You're talking a little bit about the slowdown and I'm I'm curious about the other part of it, which is, you know, there's been a lot of growth in the Sunbelt and even with all the oversupply, it seems like the Sunbelt keeps growing through it ⁓ and and eating up some of that supply. But I'm just kind of curious as a narrative, you know, California, New York, you know, some other places. There is a lot of talk about people leaving those areas. Does that actually materially impact those other Sunbelt markets, or is it just more for clicks, more for news? No, I think it really does because you look at migration data, right? And it's like you want to be in the markets where the people are moving that have net positive in migration. And the humans have to come from somewhere, right? They have if they're if they're if they're gonna be moving to one place, they have to be leaving somewhere else. If you look at different trends. You look at different legislation, you know, or even policies around b being, you know, pro-business or not as business friendly, these Sunbelt markets are benefiting from that because people are leaving the Californias, the Washington states, the Chicago, Illinois, you know, ⁓ New York, New Jersey, and they're going to the Arizonas, the Texas, you know, the the Carolinas, the Floridas. And so that does help us because not only do you have People, residents that are moving with strong net immigration, you have big companies, big corporations. I mean, look in the last 24 months, how many of these corporations have left the state of Delaware? Deke Delaware was known for being the incorporation state, and now they've had all these Fortune 500 companies that have left. Well, those companies bring thousands of jobs with them, and they bring people, right? And they bring economic growth. And so those trends definitely matter, and there's definitely a correlation between Population growth, job growth, business friendly, and how these markets perform in regards to multifamily apartments. Yeah, we're we're seeing those mega projects popping up like in Arizona, TSMC, all the businesses that are coming with them, just innumerable businesses going to Texas. It's like it's kind of a new Fortune 500 hub, that Dallas Fort Worth area and the other cities in Texas. Yeah, it's amazing. I mean, even like you even like things like the billionaire tax, which is proposed in California, right? You're driving out the founders of Google who have been there for decades. You know, Elon Musk moved a lot of his headquarters years ago to Austin, Texas, because of the California c ⁓ business environment, right? And so legislation does matter, you know, policy matters because it's driving jobs and people into certain markets. And so we look at these things and being politically agnostic, you know, as a investment firm, we're just trying to figure out which trends are gonna help us. Make good investments in apartment buildings, right? And so we want to be in the places where these people are moving, where the job the jobs are moving. I mean, even New York State, you know, the governor recently put a one year ⁓ ban on data centers. And so if you're gonna basically send a message to them, we don't want you here, how's that gonna impact you the next five years? So you have to look at all this legislation and how these trends happen. Zach, thank you for all your insight and answering some of these questions. And if you have any questions for us or you're interested in Looking into investing in multifamily, you can go to our website or you can email me directly at jason at rise48equity.com. Thanks.