Kansas City

Greg Duvall
Senior Vice President - Managing Director

John Duvall
Vice President - Producer

KANSAS CITY, MISSOURI (February 21, 2023) – Greg Duvall, managing director, and John Duvall, vice president of Northmarq’s Kansas City debt/equity team provided France Media’s Heartland Real Estate Business with responses for their 2023 Lender Insights. The special section features direct lenders and financial intermediaries from across the region who cover the challenges and opportunities in the year ahead, factors most affecting the lending environment and the property sectors to watch during 2023.

Heartland Real Estate Business (HREB): What is the biggest challenge you anticipate in 2023 as a direct lender or financial intermediary in commercial real estate?

Greg and John Duvall: Uncertainty about how long it will take the Federal Reserve to tame inflation is disrupting what had been a heavy volume of sales transactions in commercial real estate. Time lags between Fed rate increases, and corresponding reductions in economic activity make it hard to determine when the Fed should take its foot off the brake. Therefore, buyers and sellers can’t easily predict when mortgage rates will begin to decline. Until there is a consensus among real estate investors, we will likely remain in a period of price discovery, which typically means fewer sales transactions. Lower sales volume will be a challenge to mortgage lenders, particularly those without large servicing portfolios that typically provide lenders with a good supply of refinance opportunities as loans mature.

HREB: Are commercial real estate borrowers more interested in fixed- or floating-rate financing today versus a year ago and why?

Greg and John Duvall: A smaller portion of the loans Northmarq has signed up since Jan.1, 2023 are floating-rate financing compared to January 2022. Part of this has to do with a flight to security. The average SOFR (commonly used as the index for floating-rate loans) has moved up over four percent in the past 12 months. The Fed has indicated a desire to slow the increase, but no timeline as to when it will actually start decreasing rates. As such, borrowers seem to be willing to endure the “high” fixed-rate note rates we are currently seeing rather than risking potentially even higher floating-rates in the near-to-medium future.

HREB: Are there any common questions you are fielding from borrowers today, and if so what are they and what advice are you giving them?

Greg and John Duvall: “When will interest rates start going back to normal?” What is normal? We are well above the previous three-year average for the 10-year Treasury yield, which is 1.79 percent. But we are still below the 30-year average of 3.83 percent. Instead, I think the better question is “When will the United States get inflation under control?” Inflation peaked at 9.1 percent in June 2022. Though it slowed to 7.1 percent in November (and an estimated 6.5 percent in December), we are nowhere near the 2 percent average inflation rate we have seen for the past decade. Only when high inflation has been completely curbed can we start to see rates decrease. Barring another recession combined with unforeseen extraordinary circumstances (i.e. pandemic), rates may never go back down as low as we were in the past couple of years.

See the team’s insights in Heartland Real Estate Business.

Highlights:

• Property performance metrics strengthened during the third quarter, as the vacancy rate improved, and asking rents trended higher. The improving operational performance is being fueled by continued health in the local labor market.
• Vacancy fell to start the second half of the year, dipping 10 basis points in the last three months to 5.1 percent. Year over year, local vacancy dropped 40 basis points.
• Rent growth accelerated in the third quarter; asking rents advanced 2.3 percent in the period, reaching $1,139 per month. Year over year, rents are up 8.4 percent.
• Sales velocity during the third quarter closely tracked levels posted in the previous period. The median sales price is $197,200 per unit to this point in the year, up considerably from 2021. Cap rates averaged 4 percent in the last three months.

Read the report

Highlights:

• Multifamily property performance improved in the Midwest in the second quarter with vacancies tightening and rents on the rise.
• The average vacancy in the region dipped 30 basis points to 4.5 percent in the past three months. Year over year, vacancy has dropped 90 basis points.
• Most markets across the region have posted annual rent increases of more than 10 percent. The pace of growth moderated across several markets during the second quarter.
• Investment trends were mixed across the region in the second quarter. Prices are generally higher in 2022 than they were in 2021, and most markets have cap rates around 5 percent. Cap rates will likely trend higher in the second half.

Read the report

Highlights:

• Multifamily property fundamentals improved in Kansas City during the second quarter, as vacancy dropped and asking rents rose at a modest pace. Additionally, apartment development activity gained momentum.
• Local vacancy tightened in recent months, falling 40 basis points in the second quarter to 5.2 percent. Year over year, the rate declined by 50 basis points.
• Asking rents continue to push higher, although the pace of rent growth slowed in the second quarter. Local apartment rents rose 1.3 percent during the last three months to $1,113 per month. Year over year, average rents are up 10.2 percent.
• Sales activity slowed modestly in the second quarter. Year to date, the median sales price is $202,600 per unit. Cap rates remain low, averaging 3.8 percent in the last three months, but will likely rise in the second half of the year in response to higher borrowing costs.

Read the report

Gabe Tovar
Senior Vice President

Kansas City, Kansas (September 6, 2022) — Gabe Tovar has been promoted to senior vice president – investment sales in Northmarq ’s Kansas City office. Tovar joined Northmarq in 2019, where he has represented investors and developers in the sale of multifamily assets throughout the  Midwest.

Tovar will continue working with Jeff Lamott, managing director – investment sales, as the team advises clients through meaningful analysis and delivers seamless execution of their business plans. He will also continue linking with Northmarq’s Kansas City debt/equity team, ensuring clients can maximize their outcomes in all parts of a transaction; from sale, to financing, to servicing.

“Gabe’s reputation as a leading multifamily investment advisor is a direct result of his consistent execution at the highest level.  He has developed meaningful relationships with some of the industry’s most respected apartment owners across the country, and we are honored to have Gabe on our Northmarq Kansas City Team,” said Lamott.

Prior to joining Northmarq, Tovar was part of the Multifamily Advisory Group with Colliers International where he led a disposition for one of the top five largest global investment managers

Recently, Tovar secured the following sales:

• Eaton Place –115-unit/30,000 sq. ft. iconic mixed use property dating back to 1886 in Wichita, Kansas. Read the full story.
• Centropolis on Grand – 56-unit mid-rise class A apartment building in urban core of Kansas City, Missouri. Read the full story.
• Multifamily Portfolio – $42.5 million; Two properties consisting of a combined 280 units. Read the full story.

Tovar is actively involved as a Young Leader within the Urban Land Institute and volunteers on a team leading expansion and real estate activities for a local church. He graduated cum laude from the University of Northern Iowa with a degree in finance and real estate, and holds the Certified Commercial Investment Member (CCIM) designation.

Jeff Lamott
Managing Director

KANSAS CITY, MISSOURI (September 6, 2022) – Jeff Lamott, managing director of Northmarq’s Kansas City investment sales office, shared his insights on what’s fueling the Midwest multifamily market’s performance and predictions for the remaining year in a recently published story by Multi-Housing News.

The U.S. multifamily market has seen record-breaking rent growth so far this year, backed by correspondingly high demand. The currently volatile state of the economy—with rising inflation and escalating interest rates—will most likely start to take its toll on the sector’s high-paced expansion soon.

But the Midwest multifamily market poses some distinct advantages compared to other U.S. regions. The lack of excess supply has kept vacancy rates stable in all the Midwest’s major cities, according to a recent Northmarq report. And despite the slow start in 2022, experts expect an acceleration of construction starts in the second half of the year.

MHN: How did the Midwest multifamily market fare in the first half of 2022?

Lamott: New deliveries got off to a slow start in the first half of the year in the Midwest, due to prolonged challenges in supply chains and shortage of skilled trades to complete projects. Year-over-year, rent growth reached about 12 percent in the Midwest, with an average of 2.5 percent growth in the first quarter.

Sale prices on a per-unit basis hit all-time highs with the continued low interest rates, fueled by record-high capital competing for Midwest multifamily investments. Strong competition from private equity and national syndicators looking to deploy capital in the Midwest was white hot due to getting priced out of the coastal and gateway markets.

Read the full story.

Highlights:

• Deliveries of apartment properties in the Midwest region got off to a bit of a slow start to 2022 but are expected to accelerate across most markets through the end of this year and into 2023. Leading markets for new units include Chicago and Cincinnati.
• Vacancy rates ended the first quarter averaging approximately 4.8 percent across the region, with some of the lowest rates in Milwaukee and St. Louis. Average vacancy rates are down 70 basis points from one year ago.
• Rents in the Midwest have trended higher in the past several quarters. Rent growth in the first quarter averaged 2.5 percent, although a handful of markets posted gains ranging from 3 percent to nearly 4.5 percent. Year over year, rent growth reached 12.9 percent.
• The median price in the tracked Midwest markets during the first quarter was approximately $139,000 per unit, while cap rates averaged 4.5 percent. The median price was pulled higher by transactions in a handful of markets. In many markets, pricing is closer to $100,000 per unit.

Read the report

KANSAS CITY, MISSOURI (July 13, 2022) – In the world of professional sports, father-son combinations have garnered interest and curiosity. For instance, when previous United States Men’s National Soccer coach Bob Bradley assumed the coaching role of his son on the national team, many wondered “What is that dynamic like?” Northmarq’s own father-son duo in its Kansas City debt/equity office recently shed some light on this unique professional pairing. The story, featured in the Kansas City Business Journal, details how they found themselves working side by side. The Duvall partnership brings their family history full circle, with John recalling how as a child, he would accompany his father with his Polaroid camera taking photos of multifamily properties. Greg has been with Northmarq for more than 35 years, and was joined by John in 2018.

Read the full story in the Kansas City Business Journal.

Highlights:

• The Kansas City multifamily market posted improved performance at the start of the year. Asking rents trended higher while the vacancy rate held steady. Area employers continued to expand payrolls in recent months, strengthening the local economy.
• The average vacancy rate remained at 5.6 percent in the first quarter. Year over year, the rate is up 40 basis points, but vacancy has been essentially flat since the second half of 2021.
• The pace of rent growth accelerated to this point in 2022. Asking rents rose 3.9 percent in the first quarter to $1,099 per month. Year over year, average rents jumped 10.7 percent.
• Transaction volume held steady in the first quarter, matching the number of sales from the fourth quarter of last year. The median sales price surged in recent months, reaching $250,000 per unit. Cap rates continue to compress, averaging 3.6 percent in the first quarter.

Read the report

Highlights:

• Renter demand in Kansas City is slowly returning to more typical levels as rents trended higher and absorption levels jumped in 2021. The multifamily market should gain momentum in the year ahead as the economy reaches a full recovery.
• Vacancy ticked up 10 basis points during the fourth quarter, after inching lower in the third quarter. The rate ended 2021 at 5.6 percent, up 70 basis points from 2020.
• Asking rents continued to rise in the final quarter, though the pace of growth slowed from previous periods. Asking rents increased 0.8 percent in the fourth quarter, reaching $1,058 per month.
• Transaction volume held fairly steady in the second half of the year, increasing slightly in the last few months of 2021. The median sales price pushed higher throughout the year, rising 41 percent in 2021to $106,900 per unit. Cap rates continue to compress, averaging 3.8 percent in the fourth quarter.

Read the report

Gabe Tovar
Senior Vice President

John Duvall
Vice President - Producer

KANSAS CITY, MISSOURI (March 21, 2022) – Gabe Tovar, vice president- investment sales, and John Duvall, vice president – debt/equity, in Northmarq’s Kansas City office shared their insights in the cover story for the most recent edition of Midwest Multifamily & Affordable Housing Business.

The story, titled “Kansas City dealmakers weigh in on cap rates, inflation, plus hot topics with clients,” covered how the apartment sector is unequivocally the darling of the commercial real estate investment community today. Multifamily property and portfolio sales nationally totaled $335.3 billion in 2021, up 128 percent over the prior year, according to Real Capital Analytics. The volume of multifamily sales in 2021 was slightly more than double the volume of industrial sales, the next most frequently traded property type.

“What’s been the big story in the Kansas City apartment market over the past year?”

Tovar/Duvall: Investors are searching for yield, and the secondary market has proven to be a resilient harbor for new capital entering the asset class. New market entrants in 2021 included several new syndicators, private capital funds, and institutions all landing their first acquisition in this hyper-competitive secondary market.

Check out the thought leadership provided by our team.

Highlights:

• The Kansas City multifamily market recorded strong improvement during the third quarter. A surge in absorption drove vacancy rates lower and the heightened demand fueled rent growth. With the economy improving, additional gains are forecast for the local rental market.
• After trending higher for the past several quarters, the vacancy rate changed direction in the third quarter. Vacancy fell 20 basis points in the third quarter, retreating to 5.5 percent. Despite the recent improvement, the rate is up 70 basis points year over year.
• The pace of rent growth has accelerated in recent months. Asking rents rose 4 percent in the third quarter, reaching $1,050 per month. In the past year, asking rents have gained 6.2 percent.
• The pace of transactions slowed in the third quarter, following a spike in activity in the preceding three months. Prices have pushed higher throughout the year; the median price in transactions that have closed in 2021 is up to $93,100 per unit, 23 percent higher than in 2020. Cap rates have compressed to 4.5 percent on average.

Read the report

Highlights:

• The Kansas City multifamily market recorded mixed performance during the second quarter. Rents rose and investment activity gained momentum, but the vacancy rate continued to creep higher in response to an active pace of new apartment construction. As new units are absorbed and the economy strengthens, the outlook for the local multifamily market will continue to brighten.
• Vacancy trended higher in Kansas City, rising 50 basis points to 5.7 percent in the second quarter. Year over year, the rate is up 130 basis points, following an active 18 months of new development. The vacancy rate is forecast to be mostly stable through the remainder of this year.
• Asking rents rose 1.8 percent in the second quarter, reaching $1,010 per month. In the past 12 months, rents have advanced 3.6 percent.
• Far more multifamily properties sold during the second quarter than changed hands at the beginning of the year. As activity has picked up, prices have pushed higher; the median price in transactions in 2021 is up to $84,800 per unit, while cap rates have compressed to 4.4 percent.

Read the report

Highlights:

• The Kansas City multifamily market got off to a bit of a slower start to 2021. Rents rose, but vacancy also trended higher. The recovery in the labor market continued, but gains were recorded at a slower pace than at the end of last year.
• Vacancy rose during the first quarter, reaching 5.2 percent. The current rate is up 30 basis points year to date, and 80 basis points higher than one year ago.
• Asking rents advanced during the first quarter and have gained ground during the past year. Rents are up 2 percent year over year, reaching $992 per month in the first quarter.
• Sales activity in the first quarter of this year was similar to transaction levels from the same period in 2020. The median price in sales during the first quarter was approximately $60,400 per unit, while cap rates compressed to an average of 4.7 percent.

Read the report

Highlights:

• The Kansas City multifamily market posted a year of elevated supply and demand in 2020. Vacancy rose, but rents also crept higher for the year.
• Apartment vacancy ended 2020 at 4.9 percent, up 40 basis points from one year earlier. The rate inched up 10 basis points during the fourth quarter.
• Asking rents ended 2020 at $984 per month, up 2.1 percent year over year. Rents contracted slightly during the fourth quarter.
• Projects totaling approximately 1,000 units were delivered in the fourth quarter, and more than 5,600 units came online in 2020. Apartment construction should return closer to recent levels beginning in 2021; currently, more than 4,200 rental units are under construction.
• Sales of multifamily buildings gained momentum in the second half of the year, with the most activity occurring during the fourth quarter. The median price in 2020 was approximately $75,600 per unit, while cap rates compressed to 5.2 percent.

Read the report

Last year saw an eye-popping influx of apartment complex deliveries around the Kansas City metro area, though analysts believe this multifamily wave has crested, with more modest growth forecasted in 2021.

A total of 5,938 multifamily units from 31 projects came online throughout the Kansas City market in 2020, according to a report [PDF] from NorthMarq’s multifamily investment sales team.

That figure — equaling 4.1% growth of the area’s existing apartment inventory — outstrips multifamily deliveries dating back to at least 2014, per NorthMarq’s data. The next highest year for deliveries, 2016, saw 4,141 new local units.

Looking ahead to 2021, the Minneapolis-based company projects less overall inventory growth, at 2.8%. Even so, representatives noted, the lower percentage does not signify a slowdown in the metro’s multifamily market, and still compares favorably to historic averages.

Read the full story.

KANSAS CITY, MISSOURI (February 22, 2021) — We are honored to announce Real Capital Analytics (RCA) ranks NorthMarq as Kansas City’s #1 multifamily team for investment sales and debt origination in 2020! This ranking is based on the number of communities sold in the Kansas City and Lawrence markets, and the number of loans originated by the team.

In what was an extraordinary year that tested relationships and resolve, the team gave thanks for the opportunity to serve clients as their trusted multifamily advisor. The multifamily team looks forward to executing sales, originating debt, and raising equity for clients in 2021.

Click here to view available listings.

Jeff Lamott
Managing Director

Gabe Tovar
Senior Vice President

KANSAS CITY, KANSAS (February 17, 2021) – The multifamily supply wave has crested in Kansas City. According to a pipeline report from NorthMarq’s Multifamily Investment Sales team, the market saw record delivery of new apartments in 2020 with more than 5,900 units. This equals 4.1 percent growth on existing inventory, but with lighter growth of 2.8 percent projected in 2021.

“After a big wave of development delivery, some are questioning whether the market is receding, but 2.8% still equals more than 4,000 new units in 18 developments, which are taking shape in all but one of the metro’s 17 submarkets,” said Jeff Lamott, managing director – Investment Sales.

Downtown’s pipeline currently has 5,400 units planned, under construction or in lease-up. This exceeds the combined pipelines of the next two most active submarkets (Overland Park South and Olathe/Gardner.). However, developers are closely eyeing potential movement in this pipeline due to the recent passing of affordable housing legislation. A new ordinance in Kansas City, Missouri requires any project seeking incentives to set aside 20 percent of the unit count for residents earning under specific median income thresholds.

“There are 20+ developments in some sort of planning phase in the core of Kansas City, MO (Downtown, Midtown, Plaza), which equates to 30% of the total planned pipeline. I’m hearing this bright sentiment from developers – ‘we’re not sleeping on the suburbs.’ The planned pipeline shows three (projects) in North Kansas City, two in Belton, a second in Independence, and these aren’t just local developers,” said Gabe Tovar, vice president-Investment Sales. “It’s a sign of Kansas City’s economic strength when regional and national developers are pioneering multiple new pockets across the market.”

A few other key findings:

• Across the metro, there are nearly 6,000 units currently in lease-up and another 6,000 under construction slated to deliver in 2021 and 2022.
• Overland Park South continues to be the suburban leader with the most units under construction, however, is being closely followed by Shawnee/Lenexa and Olathe/Gardner.
• 28 percent of developments under construction are located in the urban core submarkets of Downtown and Midtown.
• The most active national and local developers in the market are Milhaus and Block Real Estate Services, respectively.

NorthMarq’s Kansas City office provides a full-service approach to multifamily investment with expertise in originating debt, raising equity and executing investment sales. The investment sales team is comprised of Jeff Lamott, Managing Director-Investment Sales, Tovar, and Bayley Pinney, Transaction Manager. Greg Duvall leads the seven-person debt and equity team.

Gabe Tovar
Senior Vice President

Jesse Hudson
Managing Director

MINNEAPOLIS, MINNESOTA (January 19, 2021) — NorthMarq announced two promotions in the company’s fast-growing investment sale business, which now offers multifamily investment sales in 16 offices across the U.S.

Jesse Hudson, based in the Phoenix office, was promoted to senior vice president due to his rapidly growing business pipeline and a strong network of recurring clients. Gabe Tovar, based in Kansas City, was promoted to vice president following his leadership on a new Kansas City construction report and the creation of a technology platform to support business growth that led to a dramatic increase in production volume.

Trevor Koskovich, president – Investment Sales, said that while the overall team had strong production in 2020, Hudson and Tovar also led larger initiatives and developed new business strategies.

“Jesse has been part of my team for nearly 10 years, growing from a junior broker to an important leader and expert for our clients,” said Koskovich. “Gabe, while still early in his career, brings innovative ideas to both clients and our company.”

Gabe Tovar
Senior Vice President

John Duvall
Vice President - Producer

The Kansas City multifamily market has proved it is more than resilient in the face of adversity. Throughout 2020, the market ranked consistently in the top 10 of 30 markets tracked by Yardi, logging higher occupancies and rent growth – all while welcoming a record level of new supply. That stellar performance is likely to attract even more capital to the market in 2021.
The story dominating the Kansas City market in recent years has been its booming development pipeline. Despite shutdowns and delays caused by the pandemic, developers delivered nearly 5,900 new units in 2020. That volume represents a record high growth rate of 4.1 percent added to Kansas City’s market-rate inventory as compared to an annual average rate of 2-3 percent throughout the past decade.

Looking ahead, that supply wave has crested and the pipeline is shifting to the suburbs. NorthMarq forecasts completions over the next two years to average closer to 4,000 units with 70-75 percent of these to be opening across the suburban submarkets. In recent years, between 40-50 percent of total deliveries were concentrated in the urban core, so while this data supports the speculative “exodus” of urban areas, the lengthy lead time required for planning new developments indicates this trend was well underway prior to COVID-19. Kansas City’s urban core remains well positioned with plenty of demand drivers to support continued growth and attraction of business and residents alike.

Although new construction is coming off peak levels, developers are continuing to find both opportunities and capital for new projects. Local and regional banks have a healthy appetite for financing well-located developments with leverage at 70-75 percent loan-to-cost, 5- to 7-year terms with three years interest-only, and rates averaging 3-3.5 percent. Another popular financing tool is HUD’s d4 Multifamily Loan Program offering a more aggressive 85-90 percent loan-to-cost for a 40-year term at rates around 3 percent. The HUD 221(d)4 loans require a more extensive submission process, but it is an attractive option for borrowers who can engage early and whose capital is patient.

Renter demand remains strong
The robust development pipeline is a byproduct of the economic growth occurring in Kansas City. The Midwest in general is garnering more attention from companies and individuals for its affordability and quality of life. The coronavirus pandemic has spurred more interest with data that shows positive net in-migration, and Kansas City is benefitting from that trend. Although Kansas City did experience some economic contraction during the pandemic, job losses were less severe than other areas of the country. The latest BLS unemployment data for November shows that unemployment for the metro had rebounded to 4.6 percent.

Another sign of the strength of the Kansas City market is the strong absorption of new supply. Although some submarkets have experienced a softening, the market’s overall occupancy improved by 50 basis points in 2020 from 94.5 percent to 95 percent, while rents grew by 2.4 percent year-over-year. These strong fundamentals coupled with a cresting development wave should ease any concerns about potential overbuilding over the next 12-24 months. In-migration and steady demand across the rental spectrum, those renting “by choice” or “by necessity”, bodes well for continued absorption and is supported by rapidly rising home prices in all submarkets.

Pent-up demand drives sales
Investors that hit the pause button on sales in the spring and early summer of 2020 following government shutdowns returned in the second half of the year with pent-up demand for acquisitions. Last year, NorthMarq’s investment sales and debt/equity teams in Kansas City closed on the sale of 11 apartment communities and financed a total of 23 across the region. A record 70 percent of those sales were closed in the 4th quarter and represent a season of price discovery and investor willingness to bet on the market’s quick recovery. Kansas City’s economic resilience coupled with the higher yields investors can find in the metro relative to coastal markets will support a highly-competitive sales market in 2021.

According to NorthMarq’s most recent research report, sales were averaging $74,400 per unit with average cap rates at 5.3 percent at the end of third quarter 2020. Record capital flow from buyers, along with the historically low-interest-rate environment, is continuing to drive pressure on pricing and cap rates. For example, NorthMarq facilitated the December sale of a 1970’s vintage portfolio in Liberty. The two properties, Skyline and Westowne, included 237 units with nearly half of those renovated and continuing to achieve organic rent growth on new leases. The properties sold for a cap rate of 4.85 percent, which was a record high in the submarket for that vintage.

Low-interest rates have contributed to cap rate compression (higher sale prices) as buyers can acquire assets at a lower cap rate and generate the same yield due to the lower financing cost. This favorable financing climate is likely to continue in the near term. Fannie Mae and Freddie Mac have provided guidance for slightly smaller allocations in 2021, although both have expressed an appetite for deals across the vintage spectrum.

One national trend to watch for in Kansas City is the expansion of build-to-rent product (BTR). These are subdivisions of single-family rentals developed in a professionally-managed, highly-amenitized community. The product offers a solution to residents who don’t have the down payment for a home but desire the space and privacy of a neighborhood setting. BTR product has found favor in other secondary markets and is likely to land in Kansas City as developers continue adapting to renter preferences.

MINNEAPOLIS, MINNESOTA (December 21, 2020) — NorthMarq’s Kansas City office selected reStart, Inc., which empowers individuals and families in Kansas City to prevent, navigate or end homelessness, as its recipient of a 2020 Community Involvement Grant.

John Duvall and Kyle Tucker, both vice presidents – debt & equity in the Kansas City office, recommended the non-profit based upon the impact reStart is having in its efforts end to homelessness. As of January 2019, Missouri and Kansas have 8,560 homeless individuals and families. COVID-19 has increased this number drastically in 2020.

“For the last 30 years, reStart has been on the front lines in Kansas City helping fight the pervasive homelessness problem in our community. But especially throughout COVID, they have worked exceptionally hard to keep heads on pillows and food on tables. We are thankful for the work they continue to do,” said John Duvall.

“We are honored to have been chosen for one of NorthMarq’s 2020 Community Involvement Grants. Every dollar is critical in helping individuals and families reStart their life and provide an exit out of homelessness. With immense gratitude we are honored to be partners in the fight to end homelessness in Kansas City,” said Stephanie Boyer, CEO of reStart.

Both Duvall and Tucker plan to personally volunteer, along with a number of other commercial real estate professionals in the Kansas City market, since reStart directly impacts the market in such a positive way. The non-profit offers 17 programs to provide individualized support and a housing plan for youth, individuals, veterans, and families experiencing homelessness in Kansas City.

“reStart is great at being non-discriminatory with their services to the Kansas City community. Whether it be veterans, children, or individuals who have recently lost their homes, their message is direct and clear – if you are in need, we want to help,” said Tucker.

In the third year of NorthMarq’s Community Involvement Grant program, the company has awarded grants to 18 non-profits in 16 cities. The program solicits nominations from each local office, and had an increase of 20 percent from 2019, with a total of 18 non-profits focused on affordable housing and reducing homelessness receiving these grants in 2020. NorthMarq’s 2020 grant to New Hope Housing represents its third award under the Community Involvement Grant program.

Highlights:

• Multifamily development in Kansas City has been active in 2020, offsetting healthy levels of renter demand. Vacancy rose, but rent growth accelerated and investment activity gained momentum after a lull in the second quarter.
• Vacancy rose during the third quarter, reaching 4.8 percent. The rate is up 20 basis points year over year.
• Fueled by healthy absorption levels, asking rents rose more than 1 percent from the second quarter to the third quarter, reaching $989 per month. During the past 12 months, local asking rents have increased 2.7 percent.
• Sales of apartment properties regained momentum during the third quarter after a slow start to the year. In sales that have closed thus far in 2020, the median price has reached approximately $74,400 per unit, while cap rates have compressed to 5.3 percent.

Read the report

Jeff Lamott
Managing Director

Gabe Tovar
Senior Vice President

Kansas City, KANSAS (October 26, 2020) – Despite a year of shutdowns and slowdowns, new construction of apartment communities has been on a record pace in Kansas City, according to a development report from NorthMarq’s Multifamily Investment Sales team. The 2020 Pipeline Report shows 22 projects with more than 4,600 units delivered as of the end of the third quarter.  

“This is a record 3.3 percent growth on Kansas City’s market-rate inventory. 2016 was the only other year in this economic cycle to deliver over 4,000 units,” said Gabe Tovar, vice president-Investment Sales. Delivery is based upon when the development offers the first units for lease. 

Since 2014, Kansas City has delivered an average of 3,400 units per year, adding between 2.1 – 3 percent to the existing inventory. In the last three years, nearly half of those units have delivered within the urban core (River Market to Midtown), however, 2020 is seeing less than one third of the market’s deliveries arriving there.

According to Lamott, “Even with lower volume this year, the urban core ranks number one among all submarkets for annual deliveries. Developers have harvested the low-hanging fruit and there are plenty of high-quality demand drivers substantiating its continued expansion.”

A few other key findings:

• Downtown’s pipeline is tapering. Historically, 33 percent – 50 percent of the market’s total pipeline was under construction or planned in this submarket, but is slowing to 25 percent and 12 percent, respectively.
• Other major concentrations of Kansas City’s pipeline include the Olathe/Gardner and Shawnee/Lenexa submarkets, with each carrying over 2,000 units planned, under construction, or in lease-up.  
• Nearly 70 percent of the planned pipeline is located in the suburbs and may be indicative of a shift in renter preferences induced by the COVID “work-from-home” summer.
• Reports of record supply can draw concern for overbuilding, but NorthMarq sees stability in Kansas City with occupancy hovering at 94.5 percent and rent growth above 2.0 percent in a year when many markets have dipped to neutral or negative

“Developers are reporting leasing velocities at par with prior years, so when you factor in the roller coaster of 2020 I think we’re seeing both urban and suburban locations succeed as they focus on right-sizing interiors, creating flexible amenity spaces, and delivering first-rate services,” said Tovar.  

NorthMarq’s Kansas City office, with a 30-year history providing clients with debt and equity financing, expanded the office’s services in 2019 with an investment sales team comprised of Jeff Lamott, managing director-Investment Sales, Tovar, and Bayley Pinney, transaction manager. Greg Duvall leads the seven-person debt and equity team.

View our 2020 Kansas City Pipeline Report.

Highlights:

• Despite some extreme economic volatility, the Kansas City multifamily market recorded stable performance in the first half of this year. The vacancy rate ticked lower, while rents rose modestly.
• Local vacancy ended the second quarter at 4.4 percent, down 10 basis points year to date, and 30 basis points lower than the rate one year ago.
• Rents in Kansas City inched higher in both the first and second quarters. Asking rents ended the first half at $975 per month, up 3 percent year over year.
• Sales of apartment properties slowed during the first half of this year, mirroring trends recorded across the industry. In deals that have sold, the median price was $79,900 per unit, while cap rates averaged approximately 5.3 percent.

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Highlights:

• The Kansas City multifamily market closed 2019 with healthy conditions prevailing. Vacancy dipped throughout the year, fueled by continued renter demand and a slower pace of supply growth.
• Vacancy dipped 10 basis points during the fourth quarter, ticking down to 4.5 percent. The rate improved in all four quarters of the year; vacancy fell a total of 50 basis points in 2019.
• Asking rents rose 3.8 percent in 2019, ending the year at $964 per month.
• Sales activity in 2019 outpaced levels from 2018, and prices rose. The median price reached approximately $100,500 per unit for the year, and cap rates have averaged 5.5 percent. Total transaction activity for the year topped $1 billion, the first time on record where sales exceeded that total.

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Highlights

• Conditions improved in the Kansas City multifamily market during the third quarter. The vacancy rate tightened and the pace of rent growth accelerated, while apartment development ticked higher after a slower first half of the year.

• Vacancy fell 10 basis points during the third quarter, reaching 4.6 percent. The rate has improved in each of the first three quarters of 2019. 

• Asking rents ticked up 1.4 percent to $957 per month in the third quarter; year over year, rents are up 4 percent.

• Sales velocity accelerated during the third quarter, and transaction activity thus far in 2019 is up considerably from last year’s pace. The median price in sales year to date is approximately $100,600 per unit, while cap rates have averaged 5.5 percent.

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Highlights:

• The Kansas City multifamily market posted another healthy period of performance during the second quarter. The vacancy rate dipped for the second straight quarter after rising during most of 2018.
• Vacancy dropped 20 basis points from the first quarter, falling to 4.7 percent. The current vacancy figure is 10 basis points higher than the rate from one year ago.
• Rents rose during the past three months. Asking rents ticked up to $944 per month at midyear, up 3.9 percent year over year.
• Sales of multifamily properties have been continuing at a fairly steady pace thus far in 2019. The median price in sales that have closed year to date is $100,200 per unit, up 27 percent from 2018. Cap rates have averaged 5.4 percent.

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Gabe Tovar
Senior Vice President

Jeff Lamott
Managing Director

MINNEAPOLIS (JULY 16, 2019) – NorthMarq, a leader in commercial real estate capital markets, announces the expansion of their multifamily investment sales team in Kansas City with the addition of Gabe Tovar. Tovar, an experienced multifamily investment broker, joins Jeff Lamott, managing director for the multifamily investment sales team, and Transaction Manager Bayley Pinney in NorthMarq’s Kansas City regional office. As Associate Vice President, Tovar will work to continue the expansion of NorthMarq’s national multifamily investment division across the Midwest.

Tovar will have responsibility for multifamily acquisitions, dispositions, broker opinions of value, and market insights. As a former member of the national Colliers’ Multifamily Advisory Group, he has strong local market knowledge and national relationships in investments sales, acquisitions, and market analysis.

“We are excited to welcome Gabe to our Kansas City Multifamily Team. His proven track record representing multiple high-profile assignments throughout the Kansas City market, coupled with his extensive relationships with the dominant players in the Midwest market, makes Gabe a strong fit on our investment team,” said Lamott.

Tovar and Lamott are part of NorthMarq’s growing investment sales business, which now operates from six regional offices, including San Diego, Los Angeles, Phoenix, Albuquerque, Dallas, and Kansas City.

Trevor Koskovich, president of NorthMarq’s Investment Sales business, is leading the platform’s growth. He continues to recruit new teams and professionals to join the company, leveraging the company’s culture and track record of debt and equity transactions. “We have experienced amazing success in the markets that are combining debt and equity professionals with our new investment sales brokers. The synergy adds value to our clients’ business from acquisition to loan servicing, at each step in the asset’s cycle.”

The Kansas City regional office is one of NorthMarq’s best performing offices led by top-producing mortgage lender Greg Duvall. “My clients have welcomed the additional insights from Jeff, and I know that Gabe will bring additional ideas to support the multifamily investment sector in Kansas City,” said Duvall, senior vice president/managing director for the debt and equity business.

Tovar joins the eight-person team in NorthMarq’s Kansas City regional office, 7500 College Boulevard, Suite 1220, Overland Park, Kansas.

In business since 1960, NorthMarq Capital has grown to nearly 550 employees through more than 20 acquisitions, now servicing a loan portfolio of more than $57 billion with annual transaction volume of $13 billion.

Highlights:

• The Kansas City apartment market began 2019 on an upswing, with vacancy tightening, rents rising, and property sales prices pushing higher.
• Vacancy dipped 10 basis points during the first quarter, reaching 4.9 percent. Despite the modest decline, the rate is up 50 basis points compared to one year ago.
• Asking rents reached $934 per month in the first quarter, 4.5 percent higher than one year earlier.
• Quarterly sales velocity was consistent throughout 2018, and transaction counts in the first quarter of this year matched levels from prior periods. The median price pushed up to approximately $120,500 per unit in the first quarter, with cap rates averaging 5.6 percent.

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Highlights

• The Kansas City multifamily market recorded mixed performance during the fourth quarter and for the full year of 2018. Vacancy inched higher, but rents posted strong gains and absorption was healthy. Apartment builders were active, creating some supply-side pressures in a few submarkets.
• Vacancy ended 2018 at 5 percent, up 60 basis points from one year earlier. The vacancy rate rose 20 basis points in the fourth quarter.
• The past year proved to be a particularly strong period for rent growth, with asking rents advancing by 5.2 percent to $929 per month. Class A properties recorded an average annual rent increase of 5.4 percent.
• Sales of apartment buildings were largely consistent in 2018. Activity was steady from quarter to quarter, although the overall number of properties sold in 2018 was a bit lower than in 2017. Class A and Class B cap rates compressed slightly, averaging 5.5 percent for the year. Cap rates in Class C buildings have remained above 6 percent.

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Greg Duvall
Senior Vice President - Managing Director

Greg Duvall, senior vice president of NorthMarq’s Kansas City regional office was recognized in the January/February 2019 edition of Real Estate Forum’s annual Rainmakers listing.

This is the fifth consecutive year a NorthMarq producer has been recognized as a “Rainmaker.” Last year’s winners included Nancy Ferrell, senior vice president/managing director – Baltimore, and David Link, senior vice president/managing director – Denver.

Highlights from Greg’s nominations included:

• Number of originations closed in reporting period: 23
• Volume closed in reporting period: $456,634,000
• Number of originations closed during FY2018: 21
• Total FY2018 origination volume: $478,744,000

Among the 30 finalists that made this year’s list, individuals and teams completed some 2,030 originations during the reporting period, accounting for nearly $40 billion in debt and equity financing volume.

This year’s methodology was based on a score in two fields—the total number of transactions and the total volume of all transactions. The final score was based on the sum of the two fields, with the dollar volume serving as the tiebreaker.

The data that determined the final rankings represented originations completed during the 12-month period between October 1, 2017 and September 30, 2018. Full-year 2018 figures were also listed.

Report shows healthy job creation fueled renter demand

OVERLAND PARK, KANSAS (DEC. 6, 2018) — NorthMarq Multifamily has published its first market research report for the Kansas City region, offering in-depth research and on-the-ground expertise about multifamily market conditions and trends. The company continues to grow its multifamily investment sales platform and added the Kansas City market earlier this fall.

“This research supports our clients’ investment strategies as they consider the Kansas City market for new or expanded investment,” said Jeff Lamott, managing director – NorthMarq Multifamily’s Kansas City group. “Our goal with the report is to ensure that multifamily investors have a complete picture of the submarkets, pricing and vacancy trends.”

“The report released today shows that economic activity is prompting new apartment construction, and 2018 will mark the fourth consecutive year where developers have delivered at least 3,000 rental units. The pace of new construction has pushed vacancy a bit higher in recent years, but with the rate still sitting below 5 percent, operators have been able to continue to implement rent increases,” said Pete O’Neil, director of research, NorthMarq Multifamily.

Key findings for Kansas City:

• The Kansas City multifamily market was somewhat mixed in the third quarter, with the vacancy rate inching higher but rents posting strong gains. Recent vacancy increases have been the result of new construction, rather than a decline in renter demand.
• Vacancy inched up 30 basis points during the third quarter, reaching 4.7 percent. The rate has risen in each of the past two quarters and remained in a fairly tight range over the past several years.
• Investment activity surged in the third quarter following a slower period of transactions in the second quarter. The median price dipped a bit in the most recent period but is up nearly 10 percent from the 2017 median price. Cap rates have averaged approximately 6 percent for much of 2018, with the Class A assets trading between 5.2 percent and 5.5 percent on average.
• Even with vacancy ticking higher in recent quarters, rents continue to rise. Asking rents gained 1.3 percent in the third quarter and have increased 4.3 percent in the past year to $913 per month.

Download the report:  https://www.northmarq.com/wp-content/uploads/2018/12/NMF-MarketReport_KansasCity_3Q2018.pdf

Report highlights:

• The Kansas City multifamily market was somewhat mixed in the third quarter, with the vacancy rate inching higher but rents posting strong gains. Recent vacancy increases have been the result of new construction, rather than a decline in renter demand.
• Vacancy inched up 30 basis points during the third quarter, reaching 4.7 percent. The rate has risen in each of the past two quarters and remained in a fairly tight range over the past several years.
• Even with vacancy ticking higher in recent quarters, rents continue to rise. Asking rents gained 1.3 percent in the third quarter and have increased 4.3 percent in the past year to $913 per month.
• Investment activity surged in the third quarter following a slower period of transactions in the second quarter. The median price dipped a bit in the most recent period but is up nearly 10 percent from the 2017 median price. Cap rates have averaged approximately 6 percent for much of 2018.

Download the full report here

Jeff Lamott
Managing Director

MINNEAPOLIS (OCT. 15) — NorthMarq Capital, the largest privately held commercial real estate mortgage banking firm in the U.S., announces the addition of multifamily investment sales in its Kansas City regional office. Jeff Lamott has joined the organization as senior vice president/managing director-NorthMarq Multifamily to continue expansion of the company’s multifamily investment sales business.

Lamott brings more than 13 years of experience and has represented owners in selling more than 10,000 apartment units in Kansas and Missouri. Lamott will join the existing seven-person team focused on debt, equity and servicing to round out the company’s platform. Also joining Lamott from CBRE is Transaction Manager Bayley Pinney, a licensed real estate broker and experienced professional in marketing multifamily investment properties.

Greg Duvall, managing director-NorthMarq Capital’s Kansas City office, is one of NorthMarq’s top producers nationally, with more than 90 percent of his business in multifamily assets. “We are thrilled to have Jeff and Bayley join our team here in Kansas City,” he said. “We expect this will enable us to better serve the needs of our multifamily clients.”

Kansas City joins locations in Arizona, New Mexico and Texas as the fourth office to offer investment sales in addition to debt and equity services. “We look for cultural fit with our investment sales additions and are excited with how fast we’ve been able to find great partners in our growth and how happy our clients are to be able to work with one team throughout the ownership of their multifamily and manufactured housing assets,” said Trevor Koskovich, president, NorthMarq Multifamily.

In business since 1960, NorthMarq Capital has grown to more than 500 employees through nearly 20 acquisitions, now servicing over $53 billion of loans on $13 billion of annual production. The team has moved to NorthMarq Capital’s Kansas City office, 7500 College Boulevard, Suite 1220, Overland Park, Kansas.

John Duvall
Vice President - Producer

KANSAS CITY (June 11, 2018) – NorthMarq Capital, a leader in financing commercial real estate throughout the United States, announced today that John Duvall will join the Kansas City production team as vice president.

At NorthMarq Capital, Duvall will be responsible for facilitating debt and equity placements for the entire capital stack, including: life companies, CMBS platforms, Freddie Mac, Fannie Mae and local, regional and national banks.

Prior to arriving at NorthMarq Capital, Duvall worked on a two man production team as part of Freddie Mac’s Southeast Region Multifamily Group, primarily focusing on originating multifamily mortgage loans, including contact with seller, preliminary sizing per Freddie Mac credit policies and the quoting and loan structuring process (including pricing and negotiation of loan terms). During his nearly four years with the Freddie Mac team, Duvall assisted his team in closing more than 290 loans (approximately UPB of $5.83 billion).

“I am very pleased to have John joining the NorthMarq Capital family,” said John’s father, Greg Duvall, managing director of the Kansas City Office. “Our clients will benefit from his industry experience, proven track record and understanding of our lending sources. With John on the team, our extensive multifamily financing capabilities have become even more formidable.”

Duvall holds a Bachelor degree in Economics from Princeton University.

Greg Duvall
Senior Vice President - Managing Director

Differences in the two programs aside, borrowers stand to gain, no matter if they choose Freddie or Fannie, with cutbacks on debt service and utility savings and gains for the environment.

MINNEAPOLIS—The world’s going green, and smart investors, developers and tenants are all painting with the same broad paintbrush. So are capital sources and loan servicers, according to Greg Duvall, SVP/managing director, NorthMarq Capital’s Kansas City office.

Specifically, Duvall points to Fannie Mae and Freddie Mac, as those two GSEs incentivize borrowers to take advantage of the environmental gains and the cost reductions of their green lending programs. For Freddie, that initiative is dubbed Green Advantage. For Fannie, it’s Green Rewards. Whatever the name, the GSEs are, “promoting sustainability for the right reason,” he says, “to encourage people to be environmentally friendly. It’s a mandate that comes from their regulator.”

And the GSEs themselves are incentivized to follow that mandate. “Green loans are excluded from their caps,” he says, a fact that’s good for lender and borrower. “They pass the pricing benefits on to borrowers, and, in turn, incentivize them.”

Those savings—even before folding in reductions in energy usage—can be significant. “The reduction in pricing for the borrower can be anywhere from 10 bps to 39 bps,” he says. “So borrowers are incentivized to make modifications to their properties to reduce either water or energy usage. And it obviously benefits the occupant as well, so everyone gains, from lender to tenant.”

But, not surprisingly, the two GSEs have slightly different approaches to achieving those savings.

As Duvall tells it, while Freddie’s program requires the borrower to spend a minimum of $350 per unit with a targeted 15% reduction in either of those categories – water or energy; Fannie has no per-unit minimum. But it does expect a 20% reduction in usage – again either water or energy.

(Editor’s note: Since the interview took place, the FHFA released its 2018 guidance for cap exclusion that will require a 25% increase in water or energy efficiency for 2018. Freddie Mac has also changed its per unit minimums and the property age restriction. The full guidance can be found by clicking here.)

“Also,” he says, “Fannie and Freddie track progress differently. Fannie requires documentation through the life of the loan. Freddie requires an annual report during the first four years after the loan closes.” To the benefit of the borrower, he adds, neither GSE dangles a pull-back on pricing. Nevertheless, there are expectations. Fannie gives the borrower 12 months to implement the modifications, Freddie allows 24 months.

It should be noted that, while there are differences as well in the age of eligible assets, these requirements are about to undergo modification. “It was Freddie’s policy initially that the properties needed to be 2000 vintage or earlier to qualify,” says Duvall. “Fannie didn’t have that restriction.” The coming year should bring about those changes, designed apparently to make Freddie more competitive.

No matter the age of the asset, verification as noted above is key, and Duvall explains that landlords have to provide statements of savings. Interestingly, both Fannie and Freddie are using those verifications to build a database for fine-tuning the programs going forward. Fannie has had seven years to adjust their Green Rewards program, and with no minimum per-unit cost, the payback can be achieved in as little as a year.

Waterford Place at Zion Park performed upgrades projected to save an estimated 5.2 million gallons of water per year—a 20.7% reduction in total water usage.

But verification can be tricky, especially if the landlord is dealing with a utility company that bills tenants directly, making verification more of a tractor-pull. “It could be hard for the landlord to get abundant data feedback to monitor the results over time,” he says. “But there are third-party vendors that can perform that service at pretty reasonable rates. Nevertheless, borrowers have concluded that the programs work, and it’s worth the administrative effort to do them. They more than pay for themselves.”

He explains that the upfront costs are “a one-time capital charge rather than an ongoing operating expense. The reduction in debt service more than pays for the upfront costs over a period of only a couple of years. Typically if you’re doing a five- to 10-year loan, there’s almost always a payback.”

The numbers seem to bear that out. Duvall provides the example of a 100-unit property with an overall asset value of $10 million. “With a 75% LTV,” he explains, “we’re doing a $7.5-million loan.” If Freddie demands a minimum of $350 of improvements per unit, that’s a total landlord investment of $35,000.

“On a $7.5-million loan,” he says, “a 15-basis-point reduction produces a little over $11,000 a year in savings in debt service, versus a $35,000 cost with the Freddie loan. So in a little over three years you get your money back in debt service.” Fold in the reduction in water or energy costs, and “the math is compelling.”

It was compelling enough for Waterford Place at Mount Zion, a 400-unit garden-style multifamily property in the Atlanta suburb of Stockbridge. NorthMarq Capital’s Kansas City office recently closed a loan of $28.4 million for the acquisition of the 21-year-old asset by a wholly owned subsidiary of Maxus Realty Trust in North Kansas City, MO.

“By utilizing Freddie’s Green Advantage program, the owner reduced its interest-rate spread by 20 bps,” reports Duvall. “To meet these requirements, the owner committed to installing low-flow toilets, showerheads and faucet aerators at a total cost of $180,000 or $450 per unit. These upgrades are projected to save an estimated 5.2 million gallons of water per year, which is a 20.7% reduction in the property’s total water usage. With an annual interest savings of $56,800, the owner’s payback period is approximately 3.17 years.”

You’ve heard it before. Freddie, Fannie and NorthMarq are saying it once again: “It pays to go green.”

KANSAS CITY (September 19, 2016) – Bradley Tucker has joined NorthMarq Capital as vice president in its Kansas City office. At NorthMarq, Tucker’s primary responsibility will be to assist clients with FHA/HUD financing for their multifamily and healthcare properties.

Tucker arrives at NorthMarq after being involved in commercial real estate since 2005, when he joined KeyBank Real Estate Capital, underwriting CMBS transactions. In 2010, he joined Grandbridge Real Estate Capital underwriting FHA/HUD loans. Prior to joining NorthMarq, he worked for Berkadia for more than three years where he originated FHA mortgage-insured multifamily and healthcare facilities across the country.

“We are very pleased to announce Brad has joined NorthMarq’s Kansas City office,” said Greg Duvall, senior vice president/managing director. “His experience with FHA/HUD will add to our strong multifamily capabilities and provide even more options for our clients.”

Tucker graduated from Washburn University with a Bachelor of Business Administration degree in Finance. He is actively involved with the Special Olympics. He believes in the importance of giving back to the community and has a passion for helping provide individuals with intellectual disabilities the opportunity to be an athlete.