This article is sponsored by Greystar.
What were your firm’s key events in 2023?
There were five key themes that I think defined our year. First, our credit platform was a huge focus in 2023, and we believe near-term opportunities to invest in credit are incredibly compelling.
Second is the launch and rollout of our essential housing strategy. Three years ago, we challenged ourselves to find a way to deliver new housing to the middle market to provide a better product and experience versus older properties simply aging into affordability. Our goal is to deliver new product to essential workers at rent levels that are affordable while also generating investment returns in line with the market development returns.
Third, Europe continues to be a very interesting residential market driven by chronic undersupply in our target cities. We continue to see demand outpace supply in a meaningful way. Student housing is also incredibly interesting globally, but especially in Europe and the US.
Fourth, lower transaction volume allowed us to focus even more on the execution of our existing portfolio to maximize the value of each asset.
Finally, we are investing in infrastructure for our data to both operate and invest better. Our scale and global reach generate significant data, allowing us to make better and faster real estate decisions.
What has the operating environment been like?
Top-line rent growth has been solid. Mortgage rates are higher and home price appreciation has been unprecedented, so there is more value in renting than owning a home. Those factors drive renters to the whole living sector.
The markets with the highest number of new deliveries are seeing rents moderate, but that is limited to a handful of US Sun Belt markets. We have seen a normalization of the supply chain in terms of material and construction costs. Financing is much more expensive, but the living sector is a preferred asset class for debt capital.
What key challenges did you have to overcome?
The biggest challenge across real estate is valuation. Given the 70-80 percent reduction in transaction volume, there isn’t clarity in current valuations. The picture will be clearer in 2024 as we expect the bid-ask spread to shrink.
The other major challenge was working with partners on recrafting go-forward strategies. We have seen a tremendous amount of work on the reallocation of portfolios, risk profiles, geography and product types.
Two things are happening. First, there is a realization that the living sector is not just about multifamily. There is a lot of interest in student, single-family and senior housing.
Second, Europe is becoming a bigger part of allocations, particularly around the living sector. We believe Europe is poised to perform well over the next five years, perhaps even better than the US.
Who or what’s responsible for your success?
We are in the partnership business. The partnerships we have are a huge part of anything that is defined as Greystar’s success.
Our teams are also a big part of that. It is a team-based environment, vertically integrated with a common culture and purpose. Those teams have great people who work really well together.
Additionally, we have an established and experienced global platform and an intense focus on sectors that are demographically led. Having the expertise and focus really helps to control the value creation in times of uncertainty.
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