When CAPREIT started in 1993, it may have been known more as a buyer of properties. But over time, the North Bethesda, Maryland-based owner and operator has increasingly leaned into its management business. 

“We've been acquisition guys since our inception 32 years ago. But we've really gotten into third-party management about 20 years ago, with lenders basically saying, ‘Hey, you're managing for us,’” Andrew Kadish, CEO and chief investment officer of CAPREIT, told Multifamily Dive. 

In October, CAPREIT notched a big win on the management front when it announced that it had been selected by Affordable Homes & Communities to operate 21 communities in the mid-Atlantic region, according to a press release. AHC, a developer of affordable and mixed-income multifamily communities, has a portfolio with nearly 20,000 residents.

With the AHC business now in the fold, Kadish is eyeing more growth in the affordable management business.

“Everything we own, we manage,” Kadish said. “We also do about 6,000 units for third-party clients. We're growing in both, and we definitely want to scale up in these next several years.”

Here, Kadish talks with Multifamily Dive about CAPREIT’s growth, the opportunities in affordable management and the sluggish sales market.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: What kinds of opportunities do you see in the management space?

ANDREW KADISH: Our thesis is that no one has truly offered that bespoke, custom-oriented solution on the capital A affordable side of the business for third-party management. That's where we feel like we specialize. We have in-house compliance to ensure risk mitigation. But you also need to think about it in terms of the service side and offering the same high-level quality of service that you would offer your market-rate clients. 

There should not be any sort of difference between an income-restricted community and a market-rate community. Residents, no matter where they live, demand good service, and, frankly, should expect good service. 

What needs to happen for the sales market to pick up?

It has been very slow. Several months ago, you would really point to market volatility, like interest rate volatility. But with Trump coming in, there's been a lot of volatility, whether it is tariffs or what is DOGE going to do? What is Trump going to do next? Is he going to cut everything? Are they going to privatize Fannie and Freddie? So, that’s number one. 

Whether it's in real estate or in equities, we want stability. No one wants to underwrite an exit cap that they can't truly trust. And I think that has been a major issue for a lot of the investment houses, whether institutional or really golf course guys. 

It's definitely affected companies like mine, where we're seeing some opportunities, but it's been very limited. That bid-ask spread was definitely very wide. It's beginning to constrict a little bit. 

Sellers definitely need to warm up to the fact that it is a new world. They can’t rely upon their 2021 or 2022 pro forma. They are going to get, frankly, a higher exit cap than they were expecting, and they were originally underwriting three to five years ago. 

Are acquisitions still a priority for you next year?

We are still very, very active in the markets we are targeting — really the same areas we've always been over the past three decades — the mid-Atlantic, the Southeast and the northern Midwest. We’re checking out some stuff in St. Louis and Maryland now. And we think we've got a good shot of taking a lot of stuff down over these next 12 months.

Are you seeing a lot of market distress?

I think that's what everyone was hoping for a year to 18 months or 24 months ago. They thought we would see a lot of pending maturities. All these groups, six months into COVID, bought a ton of stuff at very high pricing. 

We’ve seen a lot of pretend-and-extend. I think many lenders are very hesitant to take properties back and would rather just put it off for another 12 months. 

So we might see a little bit, but that wave of distress that we're all kind of hoping for, we're not seeing. I don't foresee that coming up.

How is the uncertain economy affecting occupancies?

Consumer confidence in the economy is just incredibly low right now. And so, while you have occupancy numbers that are still very good in our communities, you're not seeing as many people moving. 

What do people do when consumer confidence is low? I think the natural human inclination is just to stay put or remain idle. You're not seeing people moving up. It’s not just in the single-family market, but you're also seen in the apartment industry as well. So when consumer confidence is so low, I don’t see a huge influx of new residents. 

In many different locales where we thought we were going to see absorption numbers immediately start to take hold with supply going down, it's taken a bit longer than we would have originally suspected.

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