May 20, 2024

UL Interview: Greystar’s Chief Investment Officer on Multifamily Opportunities

Under the leadership of Chief Investment Officer Wes Fuller, Greystar, a vertically integrated real estate firm that owns, operates, and develops multifamily, student, and senior housing, began investing in international markets in 2013, including in Europe, Asia, and South America. Today, the company’s robust institutional investment management platform now has a global presence in 249 markets.

We sat down with Fuller to discuss Greystar’s living sector debt offerings, its new product aimed at “missing middle” renters, and the reasons behind Greystar’s optimistic outlook on the European rental housing market.

Urban Land: Has the lack of transaction volume plaguing the market impacted your ability to evaluate properties in the living sector?

Wes Fuller: From a transaction standpoint, the market’s bottomed, and it’s starting to recover. From a cap rate standpoint, the public REITs are priced materially higher than the publicly available private market—to an extent that I’ve never seen in my career. But those prices are starting to converge, and that’s a representation of a shrinking bid-ask spread.

UL: Greystar now offers multifamily lending. What kind of long-term value do you see in the credit space?

Wes Fuller: Long-term secular shifts are driving opportunities in the private credit space. With regulation driving down the market share of the traditional banks, more [is being] provided by private credit.

There’s also a short-term opportunity around the wave of required refinancing [because of surging debt maturities] within multifamily, student housing, and the whole [living] sector. As a result, new LTVs are now lower, which is creating opportunities to provide bridge financing for owners.

Our scale has many competitive advantages regarding our ability to use our reams of data to quickly underwrite every asset and our teams to physically tour every asset.

The other aspect is there’s growing investor interest in private credit. Our institutional capital partners want greater exposure to the private credit space, too.

UL: When I look at recent news about Greystar, I see a lot of investment in Europe. Why are you bullish on Europe?

Wes Fuller: Fifteen years or so ago, we launched a material effort to grow our platform [and now] our experienced Greystar teams are located in all the global cities around the world where we see long-term investment opportunities. We operate as one global team, so when we execute—invest, develop, and operate—whether it’s in London, Paris, Tokyo, São Paulo, Los Angeles, or Vancouver, the execution is consistent.

Now that we have the global platform, we approach investing as a top-down thematic investor. We are able to really look at where we see the best opportunities around the world and determine where we have high conviction and execution capabilities. We ask: What does the data tell us? What do our teams tell us? And Europe today screens very favorably within the living sector based on strong supply and demand fundamentals.

Europe doesn’t yet have a fully robust professional living sector industry, but it’s evolving rapidly. There’s a lack of sufficient purpose-designed, professionally operated multifamily buildings despite there being a lot of renters. The homeownership rate in Paris is 33 percent. It’s 20 percent in Berlin. That renter base is growing, [but] European cities are chronically undersupplied even in the best of times.

UL: Greystar has also launched an attainable housing platform, Ltd.

Wes Fuller: Yes. We have two Ltd. buildings that are operational and fully leased, and we have a new modular building that will soon finish construction and start its lease-up. There’s a tremendous amount of unmet rental demand when rents are considered attainable.

The traditional Class A multifamily development sector caters to the upper end of the market, while subsidized, government-sponsored housing caters to the lowest end. There’s a huge missing middle. Three years ago, we set out to effectively create a private market solution for attainable housing. Our goal was to deliver new, quality housing at attainable rent levels that produce acceptable investment returns without the need for subsidies.

The missing middle of renters—the essential healthcare workers, teachers, and firefighters who make between 60 and 90 percent of the Area Median Income (AMI)—represent 30 percent of the market. They effectively live in ‘naturally occurring affordable housing’: aged Class B apartments. There is a lack of new housing for essential workers.

UL: How did you figure out how to get investor returns while keeping rents attainable?

Wes Fuller: It was really about streamlining building design and construction for time efficiency and cost reduction. We simplified the process, standardized elements like roof trusses, bathrooms, and kitchens, and built a modular factory in Pennsylvania. Our tech-driven operations increased margins, and by targeting submarkets where essential workers live, not served by Class A luxury, we found less expensive sites with faster permitting.

This yields a unique product with rapid lease-ups, achieving stabilization materially faster than traditional multifamily properties. The performance of our initial properties suggests a potentially massive opportunity.

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