Joanna Zabriskie

 

Joanna Zabriskie (0:00 - 0:37)

And I think from a resident standpoint, people are putting off those adult decisions to buy a house, have a child, or even move out much later in life, which means they're gonna graduate from the smaller apartment box as they get pets, as they have a car, as they have a family, and they may not be able to, or they may not want to buy a home. And so BTR provides that backyard, the garage space, more space to work from home. So I do think it is a natural extension of the renter continuum and an important part of our offerings in the industry.

 

Nancy Lashine (0:38 - 4:31)

Hello, and thanks for tuning in to Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Capital is the lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities.

 

Who are they? What motivates them? What can we learn from their experiences? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers. And we talk about what's important to them, how they make critical decisions, who has influenced them, and a lot more. Our guest today is Joanna Zabriskie, CEO of BH, one of the largest apartment operators in the country, with roughly 100,000 units across the Sunbelt and the Midwest, run from Des Moines, Iowa.

 

Joanna spent nearly two decades at CapTech Financial Group in Ann Arbor, where she ran a multifamily fund and then co-founded Harbor Realty Partners in 2009. She found BH the hard way. A developer partner was stealing from Harbor, and she needed a manager who would reconcile every dollar.

 

She picked BH for its Midwestern values and an accounting team that reconciled cash like nobody's business. Harry Bookie soon asked her to come to Des Moines, a city she'd never visited, and 13 months later, she was president. Over the next decade, the managed portfolio more than doubled, BH built its own technology in-house, and in 2024, she led the sale of the operating platform to Prithium, the $60 billion residential investment firm.

 

Last November, she handed the president title to her longtime colleague, Melody King, and moved into a seat focused on capital and strategy. I've known Joanna since BH first thought about raising a fund, and a lot of this conversation comes back to that moment, what it takes to turn a founder-owned operator into an institutional platform. We talk about why she sold and why to Prithium, why she brought her whole senior team into due diligence when everyone told her not to, and how you keep a fortune-best workplace culture inside a much bigger firm.

 

We also get into where multifamily stands today, whether the distress she has been expecting is finally coming, and why property management may be the most underrated part of the real estate value chain. Joanna also sits down every month with the Federal Reserve Bank of Chicago as a housing consultant, so she has a pretty good sense of what's coming.

 

There's so much conversation today about what's going on in the multifamily business. I was at a dinner last week, and multifamily was headlined. David Schwartz from Waterton was speaking, and someone else was speaking from a research standpoint, and every time I talk to folks in the multifamily business, it's so depressing, and it's just the gap, the pricing gap in multi is just much broader than it is in the rest of the real estate markets, and having said that, I mean, multi has become up to 50% of many institutional investors' portfolios, and our housing crisis or lack of affordable housing is probably one of the great unsolved problems of this country, but what's going on in multifamily is so important, and it is different than the rest of the business, and you have a unique view on it, managing around 100,000 units, so I'd love to start, Joanna, with the first time we met. So you were at BH.

 

You came into our office. BH wanted to raise a fund, and I had the very unpleasant job of telling you that LPs, limited partners, weren't going to back a firm where one man owned everything, and there was no clear succession plan. Do you remember that conversation?

 

Joanna Zabriskie (4:32 - 5:53)

I do, Nancy, because in no small way, that advice that you gave me just before COVID set us on a different path than what we were gonna originally do with you, which was talking about raising capital and investing it, because we had a great track record of doing that on a deal-by-deal basis, but we had come into your office with the hopes of growing that business and doing something a little bit more institutional, and you were right. We had an aging founder with no clear succession plan, but we also had a 12-year minority investor in the management company combined with a dynamic, young executive team that really needed a growth engine to stay engaged and challenged, but then COVID happened, and then we leaned into operating in a pandemic, something that none of us had done before, and we shifted from raising capital to growing 20% as many people shifted to a higher-quality manager during those uncertain times. So as we came out of COVID, we had to relook at what we wanted to do with the platform, because we still had all those things that we had when we walked into your office, an aging founder, no succession plan, and a long-term minority investor who was interested in perhaps getting out of the business.

 

So this was in 2024, and we were ahead of that consolidating wave in the industry, and we went quietly to market, and there was a wide swath of-

 

Nancy Lashine (5:53 - 5:57)

Well, we first met probably, just to be clear, before COVID, so it was like 2019, maybe?

 

Joanna Zabriskie (5:57 - 6:50)

Yeah, yes, exactly. And so when we actually ended up going to market, we'd gone through COVID, we'd come out of COVID, we'd grown, and we, again, wanted to get closer to capital, and we decided to put the platform up potentially for sale or for investment, and hired an investment banker to do that, and had a very robust process, and a lot of investors and buyers who were very interested in BH.

 

And ultimately, we decided on Criteum as an acquisition for several factors. Don Mullen's entrepreneurial spirit was aligned with our innovation and kind of tech-forward platform and approach to business, and Predium’s broad ecosystem didn't have another multifamily player. We felt like we could have access to capital and growth opportunities. So you set us off on a path, Nancy, back in 2019.

 

Nancy Lashine (6:51 - 7:32)

Well, Joanna some little voice in the back of my head looked at you as the president of the business at that point, and I thought, I wonder if you really knew this, and you were waiting for somebody to say it out loud. So if we were a little bit of that spark, I'm very happy that we were able to help move that forward. I'm curious, since we already sort of got to the point where you had hired a banker, who else was in the room? Who else was interested, potentially, in buying BH? And how did you come to- what were the different factors that led you to an investment management firm rather than, say, another operator or somebody else who might have been interested?

 

Joanna Zabriskie (7:33 - 9:22)

We had a wide playing field of other operators, international firms, PE firms, just kind of the whole breadth and depth of who might be interested in buying a management company, whether it be for vertical integration purposes or for a five to seven year hold. And so we went through a process where, I'm sure many people have done this, but you go through and you're talking about your business to a whole bunch of people, and you narrow it down to maybe your top two or three choices. And then I made an unconventional decision at the time because there was just a small group of us in the room.

 

So it was myself and two other folks and the investment banker. And so I had my CFO, my head of acquisitions at the time, and we had done the broad discovery across the multiple platforms that were potentially interested in BH. And then against my investment banker's advice and against lots of other people's advice, I opened up the next three conversations that are top three potential acquirers.

 

I opened up that conversation to the entire senior team. So there were 10 folks that we brought over the wall that we were potentially going to sell the business. And everybody said, no, that's gonna create drama. Don't do that. And I said, no, you know what? This group has built the company and we're a very tight senior team. And this is what people are requiring, the energy and the depth of this team. And so we took a moment for everybody to absorb the fact that we were selling the company. And then that team showed up.

 

And I think we got a higher multiple and we got more excitement because I didn't do any talking in those last three meetings, very little. Our team is excited and energized and very knowledgeable about our business and they carried the water. And I think the passion that we have about our business really showed forth to those buyers.

 

Nancy Lashine (9:22 - 9:34)

So you took your 14 person senior team into the due diligence process. Well, in your mind, what was the worst case scenario that you had envisioned? And did any of it happen?

 

Joanna Zabriskie (9:35 - 10:05)

Well, that we would lose people, obviously. And I was told that it would create drama and we would lose people and they would look for other jobs and we didn't lose anybody. We actually had the time as a team to absorb the fact that change was coming.

 

And so by the time we were ready to announce the Predium acquisition of BH, each one of those folks was prepared. They had been a part of the process. They could answer their downstream teams questions. They knew exactly what was happening and there were no surprises. So we didn't lose anybody.

 

Nancy Lashine (10:07 - 10:17)

How much of the process of finding the right buyer and the right, I mean, obviously there's the fit, but how much of it was the valuation of the existing assets?

 

Joanna Zabriskie (10:18 - 11:23)

There was none of that actually, Nancy, because what Predium bought was the management company as well as the investment team and our track record. BH, as you know, has raised GP capital over the years and we've invested in deals on a GPLP strategy on a deal by deal basis. So we grew our track record that way.

 

And we left that core of assets, about a third of what we had under management had some level of BH invested equity in. And we left those in the BH legacy organization and that's where Harry Brookey sits. And we signed long-term asset and property management agreements with those assets because those assets are aligned with the strategy going forward.

 

They're part of our track record. The senior team has obviously Promote and Carry left in there and so we wanted to keep the asset and property management aligned with those assets, but not to argue about the proposed value. And we'd still be sitting here today arguing about what's– And so it was a cleaner separation to leave the operating platform separate from the assets.

 

Nancy Lashine (11:23 - 11:35)

That makes a ton of sense. What was appealing to like foreign investors about buying that kind of operating platform? Why did others who weren't successful wanna buy the business?

 

Joanna Zabriskie (11:36 - 11:47)

Well, I think the demographics of the industry speak highly and the vertical alignment with having a best-in-class operator along with an investment strategy was appealing to everyone.

 

Nancy Lashine (11:48 - 12:17)

How did you get comfortable with the fit? Like say, is this gonna be the right fit? Are we gonna- I mean, I think you have at BH Fortune Best Workplace with babies at work, sabbaticals, 81% women on the management team.

 

How do you protect that as you report to what is effectively a New York-based asset manager with a lot of Goldman and Morgan Stanley alums? There are different cultures. Am I right or wrong?

 

Joanna Zabriskie (12:17 - 15:41)

You're exactly right. But keep in mind that Predium is an operating-led investment manager. And so they have six different operating companies. And we sit in the property management side of the company with Progress Residential, but they have two lending institutions, a special servicer. And so this platform didn't have another multifamily vertical, which we liked.

 

So we weren't going to be smooshed in with somebody else's culture. And honestly, most of the company has not noticed a change in ownership. Our operating teams are still leasing apartments, turning units, and completing work orders.

 

And some of our teams have new opportunities and career paths. We are consolidating our back office cultures with our sister company, Progress. So our chief people officer, Charlotte Flores, now runs a combined HR team across both companies.

 

We share recruiting and training teams along with HR generalists. Our general counsel, Jennifer Shuman, has created a legal team that acts as a residential compliance and legal risk function across SFR, BTR, and multifamily assets. So we've gained a lot from the combination of plugging into a larger ecosystem.

 

An example of this is we've just launched an in-person maintenance training program in Phoenix this week, and we're leveraging all of Progress's tech certification and training teams. We've got access to operating data from Progress, which helps inform our leasing funnel or delinquency trends before they hit multifamily. So we've gotten a lot of benefits.

 

And you know what's interesting? There's things that we couldn't have done without Predium. And so when we plugged into Predium, it was just before this AI wave has taken off, and already operationally including AI in leasing and renewal and contact center workflows.

 

So we were not unfamiliar with AI and its uses within our core business. But what Predium has done is it's focusing on building a data moat around the entire residential ecosystem. So we're building AI-driven operational and investment tool called Prism.

 

And broadly speaking, Prism is a consolidated data layer that includes more than 200 million data points covering not just operating data, but is supplemented by third-party information. And so it organizes structured and unstructured data that better inform operating and investment decisions. And since we're seeing real dispersion across markets and their recoveries, back to your dinner conversation from the supply wave, we no longer are thinking about markets as an entire MSA or even a zip code.

 

Because conditions can be remarkably different between a few miles due to housing supply, quality of schools, employment, transportation hubs. And Prism is enabling us to analyze these corridors or these micro markets organized around these patterns. And this knowledge was previously carried in a locally based regional manager or an acquisition associates head.

 

And we are now able to real-time analyze this data. So I'll give you an example of how a pre-screening tool that takes a three to four day process and condenses it to 20 minutes. So we upload an OM, a T12, and a rent roll into Prism. And then Prism-

 

Nancy Lashine (15:41 - 15:53)

So wait, sorry, just for our audience, an operating memo, a T12, the trailing 12-month rent profit and loss, and then the current rent roll, okay.

 

Joanna Zabriskie (15:53 - 16:40)

Correct, sorry. The multifamily acronyms roll. And so what we're able to do in Prism is it will pull in rent comps, VH operating comps, sale comps.

 

It loads market and sub-market analysis. So think demographics, crime stats, household income, et cetera. So we've got all that third-party data coming into the system.

 

And then the underwriter will select the appropriate rent comps and the appropriate sales comp and input the broker guidance. That's all they do during this process. And then Prism will create a pro forma P&L with the seller's rents and VH's expenses, which is compared back to the seller's profit and loss statement for the T12 period. Because we wanna understand if there's a margin lift there. What's the operational value add that VH can-

 

Nancy Lashine (16:40 - 16:48)

A margin lift because you're more efficient with expenses.

 

Joanna Zabriskie (16:48 - 16:48)

Yes, exactly right.

 

Nancy Lashine (16:48 - 16:51)

So you generally can add a better expense ratio, okay.

 

Joanna Zabriskie (16:51 - 17:30)

And then Prism will take the rent roll and compare that to the rent comps to determine if there's a market-to-market story. So we'll get a preliminary yield and cap rate output to determine if we further wanna underwrite the deal in 20 minutes. So Nancy, as you think about like all the offering memorandums-

 

Oh is! That come across our screen, instead of like somebody making a choice, like, do I wanna do this deal or do I wanna do this deal? We can do all the deals. We can screen everything. And then we collect all that market data along the way. And that screening tool allows us to focus on what best fits in our investment box.

 

Nancy Lashine (17:30 - 17:55)

So let me ask you two questions. One is, who has set up the criteria for what goes into this process that happens in 20 minutes? And then whoever is reviewing that material, who is reviewing that material? What level of person in terms of seniority within your firm, what background do they need to have? And how do you provide checks and balances if you do?

 

Joanna Zabriskie (17:56 - 18:09)

Nancy, this reminds me of a question I'm always asked. Is AI gonna take my job, Joanna? And my answer is no. But someone using AI is gonna take your job if you're not using it.

 

Nancy Lashine (18:09 - 18:12)

But knowing how to use it is the key.

 

Joanna Zabriskie (18:12 - 18:34)

And so AI isn't taking jobs. In fact, AI has created a whole new department of people who can use Claude code. And so we have data scientists, we have data engineers, we have data architects.

 

We have a whole group of people that at Predium and at BH we never had even a year ago. These are brand new departments, people with skillsets that we didn't think we needed to have.

Nancy Lashine (18:35 - 18:38)

Do they have multifamily background or are they just really data people?

 

Joanna Zabriskie (18:39 - 18:56)

They don't at all. And so that's why the operators are so important in this. And so to your question, who has shaped this process is our acquisition team. I use this. I have uploaded an OM and I review where the data comes from.

 

Nancy Lashine (18:56 - 18:58)

Now you're showing off by the way.

 

Joanna Zabriskie (18:58 - 19:02)

Well, no, because it's so critical.

 

Nancy Lashine (19:02 - 19:02)

I'm teasing you.

 

Joanna Zabriskie (19:02 - 19:37)

It's critical to be in the leads. Well, I'm a deal junkie. So I've got to know exactly where that margin came from.

 

So we have been working with the data engineers here at Predium to create a process that is specific to multifamily. And we have a process that's specific to BTR. And there's a process for acquiring SFR homes.

 

So each of those investment strategies is guided by the operating company. And we have a shared group of data engineers who are plugging all of our systems and our thoughts into a shared operating platform to inform investment decisions.

 

Nancy Lashine (19:39 - 20:20)

So to be annoying, I'm going to just ask you, I mean, you were very sophisticated with systems at BH before the sale. Early on, you were using systems before a lot of folks were.

 

What has Predium been able to add to the process and the reason I'm asking you that is there's a thought that consolidation is inevitable in our business. And that if you're bigger, you get better results. There's also a trend towards more entrepreneurial breaking off in the investment business.

 

So, and those things do, they conflict with each other. So I'm curious what you lose and what you get.

 

Joanna Zabriskie (20:21 - 21:35)

It's a good question. I think what we're gaining is on the investment side. While we had a great investment management platform, our underwriting and screening process was Excel driven. And it still has an Excel component. We do take our screening information, drop it down to an Excel. So we can do the value add components, which is very particular to each asset.

 

You think about the units that you're renovating and how much dollars you want to put in and the lift. I'm not sure AI can do that yet. And then we load that Excel backup to do sensitivities, which is much better done by AI than by Excel.

 

And so we've gained on the investment manager side. To your point, we were already fairly ahead of the game in the industry in terms of embracing data, innovation and technology. But we also get to learn from the single family home management business at Progress.

 

And they are doing things that aren't done in multifamily. And so that gives us an angle that most in the industry doesn't. And I'll give you an example.

 

We are piloting the use of maintenance fleet trucks to do turns. And we've started-

 

Nancy Lashine (21:36 - 21:40)

To do turns? To do turning units when people move out and the next person moves in? Okay.

 

Joanna Zabriskie (21:41 - 22:21)

Yeah. And so that's typically done by our in-house teams who are also handling work orders and service for the residents. And the thought is if we can find a way to leverage off of their AI-driven scheduling maintenance platform and fit our multifamily and BTR turns into that workflow process, then we can drive better service, faster turns and improve occupancy across our assets.

 

And nobody else in the business can do that. That's where Predium has this interesting ecosystem that combines data and operations across multifamily, BTR and SFR.

 

Nancy Lashine (22:21 - 22:28)

Have you actually tested? Well, it's new. How many months old is the acquisition? Or how-

 

Joanna Zabriskie (22:28 - 22:31)

So May of 2024, we were acquired.

 

Nancy Lashine (22:31 - 22:46)

Okay. So you're called 30 months in. Have you actually tested margins, your margins relative, which would be a proof statement, presumably of what you just said against the industry standards?

 

Joanna Zabriskie (22:47 - 22:50)

Against multifamily or against SFR?

 

Nancy Lashine (22:51 - 22:53)

Well, for multifamily, since that's where you're responsible.

 

Joanna Zabriskie (22:54 - 23:22)

Yes, we have. And I'll say two things are leading to margin improvement.

 

First is our centralized platform. We have been able to remove staff from assets, the assistant community manager and shift that work to centralized platforms that has increased our renewal rates, that has decreased our bad debt and delinquency and improved overall operations, which has improved otherwise.

 

Nancy Lashine (23:25 - 23:28)

What is, can you say what your margins are or is that top secret?

 

Joanna Zabriskie (23:30 - 23:45)

I don't know. We manage plus A, B and C assets. So our margins, as you stack them up to the public rates are very different because of the assets that we manage as a third-party fee manager. We've got a little bit of everything.

 

Nancy Lashine (23:46 - 23:57)

Right, right. And the last question I'll ask you about this is if a founder-led operator called you today asking whether they should sell to an asset manager, what would you tell them?

 

Joanna Zabriskie (24:00 - 24:35)

We would tell them it depends on what your goals are. To remain a standalone, independent fund or firm in today's world, like a 30 to 40,000 or even a 90,000 unit management company is getting harder and harder. The industry is consolidating.

 

Being closer to capital and a larger ecosystem means there'll be more growth opportunities on the go forward basis. We are actively looking at acquiring other management companies and moving into different sectors. And I'm not sure we could have done that if we were independent.

 

Nancy Lashine (24:36 - 24:55)

Right, right. So you've changed your role about a year ago. You split the CEO and president roles last November of operations to Melody King.

 

So how has separating the operating seat from the capital seat, why is that something you thought you needed to do and how has that changed your view of the market?

 

Joanna Zabriskie (24:57 - 25:54)

So Mel is an operator’s operator. She grew up in the multifamily business and Mel has forgotten more about operations than I will ever know. Her skillset is very complimentary to mine, which is more investment and asset management background.

 

So her focus is to make sure that we are a best in class operator at every single one of our properties and grow our third party management business. My focus has become more strategic and working with the Predium team on acquisitions and capital raising to grow AUM for the Predium ecosystem. But I wanna expand on the comment on operations.

 

Like our senior team is a great mix of folks. We have some that have started their careers as leasing agents and work their way up like Mel has. So they understand deeply the highs and the challenges of working on a property.

 

And we have another group that has grown up in the investment side of the business. So it's a good mix. And to your point, a fair amount of them are women.

 

Nancy Lashine (25:56 - 26:00)

What's the hardest part for you of not running operations day to day?

 

Joanna Zabriskie (26:01 - 26:24)

I love the details. I love asking why questions and I love change and tinkering with things. So, but I realized that Mel actually has her hands around it.

 

She knows what she's doing and making great decisions. So I really have been able to lift up and out and look more on the acquisition strategy across the board.

 

Nancy Lashine (26:24 - 27:19)

Right. I know whenever we talk about what's going on in multifamily on that national basis, it's, if you're in the business as you are so deeply, you're sort of screaming. It's not one business, it's regional and it's so different in one market versus the next.

 

But let's talk broadly for a moment, just for purposes of kind of some of the broad brush thoughts about multifamily for folks who are listening. Starts are at their lowest point since 2011. Generally vacancy is still around 7% across the board.

 

Obviously very different market to market. Rents are roughly flat. They're up in the Midwest and they're down in the South.

 

And I think in June, you were saying that you expected rent growth to reaccelerate. Has the past four months changed that? And, when do you think pricing power for landlords will come back?

 

Joanna Zabriskie (27:21 - 31:18)

Well, it's a different market than it was in June, for sure. Capital markets are really cooling right now, just as to your point, multifamily fundamentals are improving. There are green shoes. And that's a paradox. Usually when you see fundamentals improving, right? Capital flows. But right now capital is tentative to frozen. We have a lot of color right now, but not a lot of data. It's really early days in the acquisition world, right? Cap rate discovery is happening with this new tire for longer rates. I think we're seeing a big impact on older vintage deals. There's equity distress in those assets and there's probably some debt distress too, if they're sold now.

 

The class C assets have a very limited buying pool. We have experienced, this is interesting, a new phenomena in this cycle where debt funds are coming to us and saying, look, we've gotten rid of the sponsor. These C class assets were value add.

 

They're operating below the sub market occupancy or rents or, bad debt. And we don't wanna sell them right now. We're willing to put some capital in.

 

Can you come up to the market? I'm not past the market, just lift them up to the market. And so we've got a lot of incoming properties that we are in the process of turning around right now.

 

And most of those are C class assets that the value add proposition just didn't work because of the increased rates. What we're seeing on A and B assets in the marketplace from a transaction value is that nobody's selling right now if they don't have to. But we do have a lot of maturities coming from those acquisitions in 21 and 22.

 

And so for the past 18 months, we've seen sellers that have refinanced and extended loans waiting for a better market to sell into. But that strategy is broken because of the war in Iran and the elevated oil prices and the rise in the 10 year. It's really creating some interesting acquisition opportunities in terms of a basis play.

 

But I think people are worried about how low is this gonna go? However, the green shoes, back to your question. Today's assets have NOIs that reflect three years of decreasing rents, concessions and increased expenses.

 

So they're really beat up. And I think that supply demand fundamentals are inflecting right now. Your point year to date apartments completions fell to a seven year low.

 

The high supply markets are absorbing that supply and coming out of that downward rent spiral. We're not seeing a dramatic lift, right? But we're starting to see those green shoes.

 

And the demand is there. That's something that's not been talked about a lot. We've already absorbed 345,000 units this year, according to RealPage. That's a high number, several years of high demand already. So absorption is tracking ahead of supply. And underneath those headlines of rent declines, demand has always been strong and new renter households have been forming.

 

So we have an oversupply issue, not a demand issue. What's interesting to me is there's, I think there's some tailwinds, is that the Gen Z out there, there's 20 to 30% of them living at home, depending on what day you're reading. And if 1% of that cohort moves out, it increases household demands by 500,000.

 

And most of those are gonna be renters. So as our portfolio, we're seeing that asking rents are increasing. Occupancies are rising in parts of the Sunbelt.

 

And we're starting to see concessions burn off in some sub-markets, slowly, right? And I think conditioned renters to expect concessions. So I don't think they're gonna just magically go away. I think we're gonna have them included in our discussions with new renters for a while yet, but we're gonna start seeing effective rents go up as those concessions burn off.

 

Nancy Lashine (31:19 - 31:27)

Are you seeing anything in the single family rental data from Predium that is telling you something that's not showing up in the multifamily data yet?

 

Joanna Zabriskie (31:28 - 31:57)

Well, I'll tell you what, we had a big wake-up call spring of last year in 2025, which really led us to start analyzing this data a little bit more closely, right? So Progress' traffic fell off a cliff in February of 2025. And everyone in the multifamily industry was expecting a return to normal leasing season.

 

And so we were ready to push rents and pull back on concessions and heading into the leasing season. Well, we've looked at that for about three weeks–.

 

Nancy Lashine (31:57 - 32:00)

Was that tariffs? Is that when tariffs were announced?

 

Joanna Zabriskie (32:00 - 32:59)

It could have been tariffs, but I honestly think it was just general consumer feeling of the economy at the time. The University of Michigan's Consumer Confidence Index was at an all-time low, and people were just uncertain and not moving.

 

And so what we did at BH was we stopped pricing rent increases on new leases, went to real nominal, and focused on renewals. And we were able to push our occupancy ahead of the industry because everyone else was still expecting rents to go up. And we were seeing the canary in the coal mine with Progress' traffic falling off and thinking, well, what if that hits multifamily?

 

And it was a pretty controversial decision. A lot of our clients didn't believe us. And we really had to lean into the fact that, look, if we're wrong, in June, we can start double-digit pushing rents, but let's get the occupancy before that. And that served us a good part because traffic really died off in 2025.

 

Nancy Lashine (32:59 - 33:24)

Right. One of the things you were talking about before that maybe some of our listeners are also thinking about, usually we talk to folks who are either in A, B, or C multifamily. It's very unusual to cross all of the sectors like this in one organization.

 

Why do you do it? And do you think it serves you well? And will you continue to do it?

 

Joanna Zabriskie (33:25 - 35:22)

Well, our operating chops have always been in kind of the class B value-add space. And that's what our track record is based off of. Our acquisition strategy has always been around finding good, well-located garden-style class B assets and renovating them operationally and through physical renovations.

 

Along the way, we picked up C assets and we picked up A lease-ups. And we find that it serves us very well, is that we can, I think it's more important to have geographic concentration than it is to have just one type of assets across lots of different locations. So we're able to share people, share resources, and really more economically serve our clients by having a more dense group of assets in an area.

 

You mentioned something interesting. It's like, it's not just multifamily, right? We've done student and we've done BTR.

 

And we got into BTR accidentally. We had a home builder ask us to manage several BTR communities for them in Florida. And we made the incorrect assumption that, well, it's just like multifamily, it's no big deal.

 

And that has led us to a multi-year journey in building out a stay-in-the-loan BTR division of trained operators. And it's supported by the broader platform, right? But we have learned that the lease-up staffing and marketing models are distinct for multifamily and SFR and BTR.

 

Our BTR team has dedicated regional team that's not shared with multifamily and it has dedicated marketing, pricing, and contact center agents. Again, just focused on BTR. We've built out a BTR pricing model and in our revenue management platform tailored just for BTR's needs.

 

So, as a result, we've got just under 10,000 BTR units now and it's one of our fastest growing sectors.

 

Nancy Lashine (35:22 - 35:48)

Wow, that is so interesting. And that's another podcast, Joanna, we should do some for you because that's a rabbit hole to go down. And I'm really curious because most people think that BTR is just horizontal multifamily.

 

So, clearly you have a much more nuanced understanding of it. I wanted to ask you, I believe you talked to the Chicago Fed, is it once a quarter? What is the Fed asking you now about multifamily?

 

Joanna Zabriskie (35:49 - 37:13)

Actually, it's monthly. 10 months out of the year, I sit down with their economists who are incredibly intelligent human beings. And I always am humbled by how deep their knowledge is across all the sectors of the economy.

 

And they have their list of questions, they come very prepared to these meetings and really it's content for the Beige Book, right? So, each of the banks do this within their regions. And since we have such a- And tell everybody what the Beige Book is.

 

It is the color commentary to the economy that the Federal Reserve puts out. And it has data and facts in it, but it also has more of the nuanced stories about what's happening within each region that the Federal Bank covers. And so, I check the housing box, obviously, and they ask all the questions.

 

They want to know about occupancy, they want to know about our renters and how financially healthy are they. They want to understand the acquisition market, how the treasuries are impacting acquisitions and dispositions and the overall health of the housing industry in general. Obviously, during COVID, they wanted to know about payments and delinquency and the rent collections that we were helping our residents get around COVID.

 

So, they're just very interested in all the details of housing because it's such an important part of our economy.

 

Nancy Lashine (37:15 - 37:51)

And what are you seeing or hearing in terms of when the buying opportunity will finally get here? I think a lot of people have been saying for quite a while that the buying opportunity is coming. I think bank multifamily delinquency is around 1.5%, agency delinquency is 0.6%. There's been this extension, the 311s or 31111. Are we getting to the end of that road? And are we starting to see some interesting sales from the banks? And are the banks realizing the extent of the issues that they have?

 

Joanna Zabriskie (37:52 - 39:34)

What an interesting market today. So, the sellers that are selling right now, they have to sell. These are the wave of assets bought in 21 and 22 that have long maturities coming due.

 

And any refinance means a significant amount of cash in with today's rates. And so, we're seeing, because those assets were bought at the height of the market, we're seeing a real decrease in basis from when the peak was. So, even before we had treasuries above five, we, Green Street was saying that values were down 20 to 25%.

 

And I think they're probably more than that right now. So, I think we're on a discovery process on values for today. And it's a little too early to tell where this is going.

 

But what's going to happen, what happens in every cycle, is that we won't be able to tell where the bottom of the market is until it's in our rear view mirror. And we know that there's good buying opportunities on a basis play right now. And we're going to have more coming up in the next two quarters.

 

And then when the fundamentals really turn, and more than just green shoots, right? When you see effective rents going up and occupancies back in the 94 to 95% range, even in the Sunbelt, then you're going to see a lot of capital jump in. So, it's going to set a floor, because there is a lot of capital interested in reinvesting in multifamily that's sitting on the sidelines right now.

 

Now, whether or not there'll be distress, I do think there's going to be distress in the C-class asset market, both debt and equity. But we'll see how far or how deep that goes with A and B assets, like 2000 Vintage and newer. I still think there is a healthy buying pool for those assets at the right price.

 

Nancy Lashine (39:36 - 39:39)

What are you interested in buying today? Where do you see the best value?

 

Joanna Zabriskie (39:41 - 40:19)

Still interested in buying what we have historically bought, which is that garden-style suburban class B asset that is workforce housing with a small A, that we're able to go in and renovate physically, as well as operationally. And I think that with our tech-enabled operations, we're seeing just as much operational lift as we can provide on the physical side now. So, we're still looking for that, although hoping that OP capital return expectations are coming down from that mid-teens net to something that's a little bit more realistic with today's rates.

 

Nancy Lashine (40:19 - 40:29)

So, when you see things that you'd want to buy priced today, are they being priced in the low-teens gross after 50%, 65% leverage?

 

Joanna Zabriskie (40:30 - 40:41)

Right, we're actually pricing them slightly higher than that. But yeah, I think that that low to mid-teens gross is a fair place to be.

 

Nancy Lashine (40:42 - 40:50)

Right, which is challenging when your debt is 6%. And cap rates haven't quite gotten there across the board.

 

Joanna Zabriskie (40:50 - 40:57)

But I think they're inching down. I think cap rates are coming more in the range to make that IRR achievable.

 

Nancy Lashine (40:58 - 41:02)

You think that for the most part, there's positive leverage today in the jails that are trading?

 

Joanna Zabriskie (41:03 - 41:39)

No, I don't yet. I don't, I'm not seeing positive leverage yet. I think sellers still need to reset their expectations.

 

But what we're starting to see in these broker-led sale processes is that the broker's guidance is 10 to 15% where the market is coming in. So, we're starting to see buyers kind of dig in and say, hey, this is where the deal works for me, creating some positive leverage, some, but not as much as we used to, obviously, back when rates were lower.

 

Nancy Lashine (41:40 - 42:08)

I think we were seeing that if you just adjusted most deals to the SOFR curve and increased exit cap rates 25 bps, it was probably an 8% decline in price. So, you say, okay, I want more Jim Ferrera, 10 to 15%. Feels pretty good. And then it's just, you have to sell. Do you see any banks having to do wholesale loan sales or any real distress at the bank level yet?

 

Joanna Zabriskie (42:09 - 42:31)

Not yet, but I do think some of it's coming. The question is how long will debt funds be able to hang on to some of these class C assets that they lent on for a value-add strategy? The sponsors are gone or being sent out.

 

And the question is, how long will they want to hold on to them before they sell?

 

Nancy Lashine (42:32 - 42:49)

One of the things we've seen some folks talk about is that the best acquisition opportunities right now are other multifamily companies, pick up their management or pick up their construction capability or whatever it is that would be additive. Are you looking at that as well?

 

Joanna Zabriskie (42:49 - 43:11)

Absolutely, we are very active in that market looking at medium, small to medium sized regional companies now for a lift up and roll up. Right, both property management, construction. Are you in development as well?

 

We are not in development. We have a construction team that manages renovations, but we don't do new development.

 

Nancy Lashine (43:13 - 43:34)

I want to ask you one question about BTR. Just, I think you were quoted as saying that Heron calls Bill to rent the future of the industry. And you said he's prone to hyperbole, but probably not wrong.

 

With BTR starts down 20, 25% and the Road Act now law, is he still right? Is that the future?

 

Joanna Zabriskie (43:35 - 44:42)

I still think he's right because the starts are down, but it's still a viable part of every home builders strategy, right? I mean, if you have a hundred assets and a hundred homes that you're building and you can sell 20 to somebody who will run them as a BTR community, that is your equity to do your next deal. And so it makes good sense for home builders to build, to sell, to build, to rent operators.

 

And I think from a resident standpoint, people are putting off those adult decisions to buy a house, have a child, or even move out much later in life, which means they're gonna graduate from the smaller apartment box as they get pets, as they have a car, as they have a family, and they may not be able to, or they may not want to buy a home. And so BTR provides that backyard, the garage space, more space to work from home. So I do think it is a natural extension of the renter continuum and an important part of our offerings in the industry.

 

Nancy Lashine (44:42 - 44:50)

Yeah, I agree. It makes so much sense. I wanna ask you a few questions just in closing.

 

Who's had the most influence on you as a leader?

 

Joanna Zabriskie (44:52 - 45:39)

Oh, well, I gotta give a nod to my parents, of course. I had a pretty humble upkeeping and it keeps me centered on the jobs we create in our industry and the people that fill them. They're important. They're our lifeblood. Harry Bookie, of course, and his relentless focus on the client's happiness. And I think, lastly, my senior team.

 

They are a group of sharpshooters that fearlessly ask questions and demand high standards. They're a group that shouldered operating in a pandemic, created an AI-centralized operating platform, and has gone through a major acquisition by Predium. And we still enjoy tackling the challenges of operations together.

 

So they're why I go to work every day.

 

Nancy Lashine (45:40 - 45:50)

That is so fun. It takes a real leader to give everybody the freedom to do that and to be that. So kudos to you, Joanna. What's the best investment decision you ever made?

 

Joanna Zabriskie (45:53 - 46:12)

Investing in multifamily coming out of the GFC. I think 2010 through 13, it was so hard to raise capital, but the deals were fantastic. And I would say the inverse of that was not doing very many deals in 21 to 23, even though we did have capital.

 

Nancy Lashine (46:15 - 46:29)

Boy, it is such a cyclical business and hard to have courage of your convictions in the moment. It's one of the few good things about getting older. Whether you obsessed with outside of work or reading or listening to, what comes to mind?

 

Joanna Zabriskie (46:30 - 46:32)

You mean outside of Real Estate Capital podcasts?

 

Nancy Lashine (46:32 - 46:33)

Yeah, exactly.

 

Joanna Zabriskie (46:34 - 47:13)

Well, now that I'm in New York several times a month at Predium, I am a huge fan of this city.

 

And I'm trying to make time to walk the High Line or take in a show. I just saw O'Mary or pop into the Whitney and Oyamuma. And just to enjoy being in the city and all that it has to offer.

 

I used to come here once a quarter and all I did was go to meetings and stay in a hotel and go to a business dinner. And now I want to appreciate the city for what it is, a unique place in our world. I just finished reading, and you should read this book, Being a New Yorker. I regret almost everything.

 

Nancy Lashine (47:13 - 47:17)

Oh, I literally am reading it right now.

 

Joanna Zabriskie (47:19 - 47:31)

Yes. So, what an interesting life Keith had and despite the odds invented downtown here in New York. And so I'm going on a pilgrimage to eat at some of his remaining restaurants.

 

Nancy Lashine (47:32 - 48:05)

That's so funny. I started the other day. Well, I love your answer. I would just like to say ditto, ditto, ditto. So as a New Yorker who definitely doesn't, I feel like I don't take enough time to enjoy all the things you just talked about. I was picturing them all as you were describing them.

 

Joanna, you are a gem. You've run such an incredible business, somewhat under the radar for many of us in the institutional investment management business. I suspect not for long.

 

I really appreciate your taking time out of your very busy schedule to do this. Thank you very much.

 

Joanna Zabriskie (48:06 - 48:09)

Oh, Nancy, I'm a huge fan of yours. So thank you for your time.

 

Nancy Lashine (48:11 - 48:43)

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media.

 

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