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Multifamily Momentum Not Slowing Down

12/05/2012 | By Matthew Bechard

Ed Pettinella, president and CEO of Home Properties (NYSE: HME), joined REIT.com for a CEO Spotlight interview at REITWorld 2012: NAREIT's Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.

Home Properties is a multifamily REIT with assets primarily along the East Coast. Headquartered in Maryland, the company owns, operates, develops, acquires and rehabilitates apartment communities.

Pettinella said he anticipates another strong year for acquisitions and development in 2013. He said in the past 30 months, Home Properties has completed about $1.1 billion in acquisitions and has been active in development. He said the company hopes to do $200 million to $300 million in acquisitions in 2013 and about $100 million in development.

He discussed Home Properties' focus on acquiring and upgrading properties.

"The good news is we are in an environment where interest rates are so low we are seeing all of our deals, at an unprecedented level, being accretive from day one "“ meaning that we are making money from day one. In the previous years, it would take about a year or a year and half to see the returns come forward," Pettinella said

He added that the company avoids potential challenges when rehabbing buildings by working on them one at a time, and by not shutting down particular buildings, so that tenants are not inconvenienced.

While the multifamily sector continues to show strength, Pettinella said Home Properties has gotten out of markets that it didn't consider high growth markets, including Detroit, Toledo, Columbus and upstate New York.

"We've moved most of those monies into our seven major markets: Chicago, Boston, Long Island, northern New Jersey, Philadelphia, Baltimore and the D.C. region," he said. "We like those seven markets. The two top performing markets right now are Boston and Philadelphia."

Pettinella predicts that the dominant trend for the multifamily sector in 2013 will be continued growth in the sector.

"I think the percentage of people renting is going to continue to increase. Immigration levels are increasing, and almost 80-plus percent [of immigrants] definitely go for a rental-type situation when they first come to the country. And 18-to-24 year olds will look to renting. That age bracket is increasing in America," he said.