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Every Friday, join us as we dive into the latest in real estate multifamily with David Moghavem, Head of East Coast Acquisitions at Trion Properties. David invites top experts who know the ins, outs, and trends shaping the real estate multifamily market across the nation!
Whether you’re a seasoned investor or just curious about where the next big opportunity might be, Deal Flow Friday brings you the weekly inside scoop on what’s hot, what’s not, and what to watch for in today’s ever-evolving real estate scene.
David Moghavem (00:14)
All right, welcome to another episode of Deal Flow Friday. I'm your host, David Mogavum. I just got back from NMHC. So today we're gonna do a little NMHC recap. For those of you who don't know, NMHC stands for National Multifamily Housing Council. And every year they do a massive conference. It's literally like the Superbowl of conferences for multifamily owners and people in the multifamily industry.
And it's used as a time to catch up with brokers, allocators, lenders, vendors, colleagues, and competitors. It's a conference where strategies are shared, sentiment is felt, you reminisce about the year before, who overpaid for that one deal, who got the deal of a lifetime,
you know, if you've ever experienced NMHC, it's also extremely exhausting. it's just jam packed meetings, back to back to back. The way I do is 30 minute meetings. I've seen some people doing 15 minute meetings, which is insane. But it's a very important conference, not just because it's so efficient and you have everyone in the industry all in one place.
nationally to be in front of, but it's a great time to just feel the vibes. I know that's like a very Gen Z thing to say, but I really mean it in the sense that when you're at these conferences, there's something almost intangible with the sentiment and it's maybe a little bit less about what people say, but just how they feel, how they feel about the market, the way that they're pitching a deal.
the conviction they have, the lack of conviction they might have. So I'm gonna try to articulate as best as possible, some of the vibes that I felt, some of the intangibles, some of the sentiment ⁓ in hopes that you get a sense of how the multifamily industry is feeling right now.
So to me, it's all about picking up sentiment, going beyond the Excel and offering memorandums that are behind a desktop and actually meeting people face to face. You really cannot replace that. And I feel like this is a great conference where you get to do that at scale.
So in this episode, want to share a few takeaways, some interesting tidbits, try to articulate as best as I can the vibes coming out of this year's conference.
So here are a few key takeaways. First off, one of the barometers I always like to make a note of is attendance. This year was a bit different. It was an absolute nightmare for those coming from the Northeast or even the East Coast got affected where there was a lot of flight cancellations and a lot of people didn't show up. A lot of the people in the Northeast canceled their meetings. A lot of people in the Southeast got affected and didn't make it.
Um, some other people that were connecting missed like the first day. So naturally just felt a little bit more empty. And a lot of people said, you know, it's due to the flights and it was just a little bit lower attendance because of that. I went in, I searched the registered attendees and the registered attendees for this year was 4,401 registered attendees. Now.
I couldn't find the 2025 registered attendees, but that felt low in general. I know this is usually like a 10,000 plus person event easily. And listen, it's not the best barometer of checking registered attendees. There's a lot of people that go there that don't register and are just networking, but I'll get the exact number, but I feel like that's down significantly. And I feel like a reason to it is just the fact that the
past three years have been a bit repetitive at these conferences where there's a little bit of optimism in the beginning, the optimism in the beginning says, hey, it's gonna maybe be slow, but it's gonna be better the second half of the year, something happens in the middle, and then the end doesn't really pan out to what it's supposed to be. And it's like, no, it's gonna be next year, it's gonna be next year. So I feel like attendance is down because of some of that.
in conjunction with the fact that it was tough for everyone to travel.
Secondly, I felt there was a little bit of an unspoken understanding that 2025 was really hard. ⁓ For some people, it was good enough. For others, it may have been the hardest year of their careers. And I think that seeped into just the way the conversations were handled. There was subtle differences of instead of saying, how was your year? Instead, brokers would ask,
What are you targeting this year? Or instead of focusing on deals that got done as an example for what you're looking for, it was focused on, A, this was a deal we were investing final on, or here was a deal that we got really close on, if you're talking to equity, and it got through committee, but something happened and didn't work. So it was just a little bit of a shift in tone and focus on what deals or what needs to happen for deals to get done.
But with all that said, I think the overall sentiment for the conference felt really positive. For everyone that was there, there were a lot of optimism. I would say cautious optimism, but nonetheless optimistic. Felt like, to describe it, you're still in the tunnel. You see the light at the end of the tunnel, but you're still in it.
I wanna share a few takeaways that I noticed kind of aggregating all the conversations together beyond the vibes. So first on the deal front to preface 2025 was a year that was just filled with false starts. Deals that almost traded but didn't. Deals that went out to market, went under contract, retraded and then just stalled and didn't trade.
On the distress side, you saw a lot of that, where not just operationally distressed, but on these cap stack distress deals where you're facing low maturities and the deals are at the loan balance, above the loan balance, maybe a little below the loan balance, and they're hovering around that loan balance, you saw a lot of these deals that lived right at the edge of that value, but couldn't cross the finish line. And even personally, we experienced a few of those and we were not alone. There was a lot of people
that expressed like, this was a year where we had a lot taken out to market and a lot that didn't trade. And naturally everyone was generalizing this as pricing dislocation. But the truth is that this wasn't just pricing dislocation. It was communication dislocation. And let me explain this for a little bit. Owners thought that they controlled the process during this time when you're taking a deal out to market.
But the truth is when a deal is hovering right at that loan balance, plus or minus, lenders are also a part of that decision making process. And the problem was in some of these distressed deals were hovering right at the loan balance, the lenders weren't really looped in and the owner and lender weren't really aligned early enough to make a deal happen. So a lot of marketed processes
Brokers were talking to owners who they thought controlled the process. And if a distressed deal with the loan maturity cleared the loan balance, the owner was in fact in control. But for any deal that wasn't at the loan balance or wasn't getting to the loan balance, you saw a lot of deals just die simply because the lender wasn't fully involved in the decision-making process. So again, not.
pricing dislocation, but communication dislocation. So you just have assets that looked tradable on paper, but then stalled the moment that real underwriting happened, real DD happened, maybe operations deteriorated during the process, and the lender just wasn't looped in, and it stalled the deal and died. So this year just feels different. I had a lot of conversations with brokers that are in some distressed markets.
And it just seemed to me that there was a lot more of a direct communication with lenders being involved in the sale process earlier. They seem to now be part of this process this time around. Now, does that guarantee that a trade is going to happen, that a deal is going to happen? No, but it removes that one big obstacle or one big source of friction that we saw last year.
When the true decision maker is looped in, the probability of execution is going to go up. I heard a lot of people quietly wondering whether we're about to see seller capitulation, but to me, it's also lender capitulation in that regard. And it's an important distinction. It suggests that this cycle
clear not because owners come down to price but because owners and lenders are in agreement and the full cap stock is in agreement as does that is now accepting reality altogether.
Another shift I'm starting to notice during the NMHC process is the move back to off-market executions. I think this is going to be a year where you're going to see a lot more off-market trades.
There's less gray area around values now. Since the rate hike, sellers were hopeful to achieve better than recent marketed trades. And sellers were hopeful to hit ambitious guidance. But today, even sellers that don't love pricing, they understand the range and may look for a proven buyer to execute at that range rather than doing a full marketing process. Especially if it's already been done previously. ⁓
Deal has been taken out to market and has ran through that process. You get a sense of who the top buyers were. You get a sense of where values were. By taking it out, you stale the deal. You stale the listing. You spin a broker's wheels to do another 40 tours just to get to the same price. So I think just through the exercise these past several years, you're gonna start to see a little bit more of these truncated short sale processes.
with proven buyers in the mix to execute.
Several people told me this, they'd rather transact quietly with a proven buyer than chase a hypothetical higher bid that may never fund, whether it be an owner, a lender or a broker. And it makes a lot of sense. mean, owners rather not stale the listing further with the second process and brokers rather not do 40 plus tours if it can be avoided to land at the same value and group of buyers that they did the first time around.
In terms of markets, the geographic divergence is becoming more and more obvious. We went through this a little bit on the last monologue of the different quadrants and how the different supply demand dynamics are looking like heading into 2026. And you got a lot of that talking to brokers.
Some markets feel stuck. You can get a sense the weight of oversupply and stalled rent growth hanging over conversations. The honest conversation about supply demand dynamics and whether you have conviction to underwrite through the pain to get in at a good basis. And then at the same time you have markets where conviction is returning faster.
tight supply environments where long-term believers are stepping back in aggressively. In those pockets, pricing is snapping back quicker than macro headlines would suggest. But even there, the buyers are concentrated. It's just a handful of groups with deep local conviction. It's not a broad wave of speculative capital.
The most surprising thing to me in regards to sentiment was how little people wanted to talk about macro. A year ago, every hallway conversation was talking about rates, Fed policy, recession predictions, inflation narratives. This year, it was barely mentioned. No obsession over cuts, no doom loops about hire for longer, no tariff chatter, nothing, like none of that.
It was, it doesn't mean that that doesn't exist, but I think everyone's just numb to everything going on. They're a little bit numb to any of these headlines.
They're numb to the erratic tariff behavior that the administration wants to put on. They're numb to the Fed drama that might be going on. It's almost like a new normal.
To me, it feels like the industry has absorbed it. There's definitely kind of numbness now to the headlines that used to freeze decision-making inside the CRE community. It feels closer to business as usual. No news is good news, or maybe too much news is just the same old news.
So it's not that conditions have gotten easier, but it's because now the conditions are just a little more understood. And when uncertainty becomes familiar, it stops paralyzing people. To me, that just signals a form of macro stability heading into 2026, which is something we desperately need. You it's not optimism. It's not excitement. It's not, ⁓ this is the year where things are going to rip. It's just stability.
And I think stability is the first step. And people are thankful for that. And I think it's healthy for that.
So if I had to summarize the sentiment of this year's NMHC in one sentence, it would be this. The industry is done arguing with reality. There's realism, there's alignment, there's cautious optimism, and there's a growing respect for discipline that didn't exist at the top of the cycle. We're not back to the boom ties.
We're not taking this CRE investment to the moon. I don't think we're really going to see markets rip this year, maybe outside of the Bay Area.
but we're also not pretending the market is broken beyond repair.
The transaction engine is slowly restarting and it's time.
And this time it's being powered by execution instead of hype.
And honestly, that might be the healthiest foundation for this next cycle. The next 12 to 18 months won't be about these hero trades. They'll be about clean trades and clean trades that are what rebuild volume.
That's what NMHC felt like to me, the beginning of a cleaner transaction market.