‘Hot, Scary And Exciting’: A Top HUD Developer On The State Of Multifamily

It has been a wild few years for the multifamily market. Despite fears that the pandemic would disrupt demand, the market experienced an unexpected resurgence in 2021, and demand remained strong in 2022 as inflation and high prices kept single-family homeownership out of reach for many.

“I would say the multifamily market is hot, scary and exciting all at once,” said Dwight Dunton, founder and CEO of Bonaventure, an integrated alternative asset manager specializing in design, property management and investment management of multifamily properties. “You've got renters who seem to be coming out of the woodwork in certain markets. You've also got investors targeting the market who are increasing their allocations or are brand new to it, and that creates excitement.”

Bonaventure has completed over $4.4B in transactions including $1.1B in housing and urban development loans and manages 6,328 units nationwide. Bisnow sat down with Dunton to get his thoughts on the state of this exciting, scary market, where he thinks demand is heading and what Bonaventure’s plans are for the future. 

Bisnow: Can you say more about the state of the multifamily market? What about it is “scary”? 

Dunton: There's a ton of activity throughout every part of the food chain from the activities at the property all the way through the operations and marketing, design, construction and land acquisitions. This is exciting, but it’s also scary, because what has historically been a slow and steady market is experiencing an amplification that no one's ever seen before. At the same time, wage inflation is happening, products and services are in short supply, and on the construction side of the market, you've got real labor and materials shortages. 

Additionally, interest rates are accelerating ahead in a historic fashion, albeit from a very low point. And municipalities are still backlogged, trying to keep up with the things that they need to do to support their existing multifamily stock or the creation of additional housing. 

Bisnow: What are some of the biggest challenges the market is facing? 

Dunton: In many markets, there's a palpable housing shortage, which is resulting in rents that are climbing at pretty unprecedented rates. And so the market has been challenged to meet the demand of consumers who now find themselves exposed to significantly higher rental rates than they were in the past. From the capital market side, with the rise in interest rates, it's become harder to finance transactions, which is creating uncertainty in the financial markets around what cap rates are going to be in the future. 

On the construction side, the challenge is the availability of materials and labor to actually get buildings built. I heard someone say that the difference between building apartments versus a housing community is that building 300 homes is really a series of very short sprints — start a house, you can be done in 60 or 90 days — whereas building an apartment community is like planning a marathon that is going to last for two years. We're having to make commitments today while guessing what the materials and labor markets will be two years from now. This was hard during very calm markets. Now we've got this in a very, very choppy sea, where there's lots of volatility, and that's making it even harder to predict where things will be.

Bisnow: What has Bonaventure been doing the last two years? Have you made any changes? 

Dunton: In 2020, we began with a focus on taking care of our residents and our associates in every possible way, starting first and foremost with their physical health, and then making sure we were financially stable. As we started to get our arms around doing business in a pandemic, it became clear that we provide an essential service as people's homes became more important to them than ever before. 

Now, as we've come out the other side, we’re focused on how we can operate in a market that's very different than any we’ve seen. During the pandemic, many people moved from large, expensive markets to more affordable ones where they could get more space, and these are the markets we operate out of. This has presented many opportunities and challenges for us and our clients that we continue to work on today.

We've also been focused on growing our business. That has always been a top focus for us, but now we’re growing against a totally different backdrop than the one we anticipated. We’ve accelerated our efforts to get much deeper into supply chain management — we have always been a company that was committed to being vertically integrated, having our own design team, our own construction team and property management team — but now we are pushing deeper into the supply chain to drive efficiencies and procurement of materials. That was a goal pre-pandemic; now it's a necessity post-pandemic, and the good news is we had a head start.

Bisnow: What is the plan for the future of Bonaventure? 

Dunton: We are going to continue to be focused on how we connect capital to great investments in the multifamily space. We have intense recruitment efforts underway to prepare for our rapid growth over the next couple of years and we have a robust development pipeline for future projects across the Southeast. We’re entering new markets and we’re excited to see the Bonaventure brand expand. 

This article was originally published in May 2022 and has been updated to reflect more recent numbers. 

This article was produced in collaboration between Studio B and Bonaventure. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to [email protected].