REAL ESTATE NEWS

MG Properties Founder and CEO Mark Gleiberman is betting that the multifamily industry's current dislocation will create its next buying opportunity. While oversupply continues to weigh on operating results in key Sun Belt markets, Gleiberman is using the period to expand selectively, press for greater operating scale and prepare for a recovery that he believes is already taking shape unevenly across the West.

For Gleiberman, the central question is not whether markets such as Phoenix and Denver will recover, but how long owners can remain disciplined while they wait. MG Properties, which owns and manages apartments across seven Western states, is pursuing acquisitions even as it defers some capital work and calibrates concessions in markets still flooded with new supply.

That split-screen approach reflects a broader shift in multifamily. The sector's operating environment remains challenging in many markets, but the tougher capital-raising climate and lower property values have also reduced competition for buyers with liquidity, investor relationships and the ability to operate assets directly.

Gleiberman is scheduled to speak at GlobeSt.com's Multifamily Fall Owners Forum, where the market's competing signals are likely to be central to the conversation. The industry is still absorbing the consequences of a development boom and higher financing costs. Yet for operators with capital, local knowledge, and patience, the same conditions hurting current operations may be setting up the next acquisition cycle.

Buying Into The Dislocation

MG Properties is actively looking for acquisitions in Washington, Oregon, California, Arizona, Nevada, Colorado and Texas. Rather than concentrating solely on marquee metros, Gleiberman said the company is focused on submarkets where it sees the strongest relative opportunity.

The strategy is rooted partly in MG Properties' operating model. The company is vertically integrated and manages its own communities, giving it a close view of leasing trends, concessions, occupancy and expense pressure at the property level. That can be especially valuable in a market where broad metropolitan statistics often conceal sharp differences between submarkets.

"We're focused maybe more on submarkets necessarily than particular markets in terms of where we think the best opportunities are," Gleiberman said.

The near-term logic is straightforward: capital is harder to raise, transactions are more difficult to finance and values have fallen from prior-cycle highs. That has left fewer aggressive bidders in the market, Gleiberman said, creating an opening for companies that can still access equity.

MG Properties has more than 2,000 private investors, according to Gleiberman. While he acknowledged that capital raising was easier two or three years ago, he said the company's investor base gives it an advantage at a time when many prospective buyers are sidelined.

"We think that it is the right opportunity right now to aggressively be acquiring properties," he said, citing the potential upside in values as market conditions improve.

The thesis is not a simple bet on a quick rebound in rent growth. It is a bet that properties purchased during a period of muted pricing, weak sentiment and limited buyer competition can produce stronger returns once supply and demand move back into balance.

Supply Still Dictates Operations

The difficulty is that the recovery is not arriving at the same pace everywhere. MG Properties has seen California emerge as one of its strongest operating regions over the past six to 12 months, while Denver and Phoenix remain more challenging because of new construction deliveries.

In the Bay Area, the company's portfolio in San Jose, San Francisco and Oakland is running at roughly 96% to 97% occupancy, Gleiberman said. Even there, however, the operating task is not simply to raise rents. Renters have become accustomed to concessions, meaning owners must gradually adjust incentives rather than abruptly remove them.

That distinction is important. An improving occupancy number does not necessarily translate immediately into pricing power. In markets coming out of a concession-heavy cycle, landlords must decide whether to cut incentives, push asking rents or balance the two. Moving too aggressively can cost occupancy; moving too slowly can leave revenue on the table.

Phoenix and Denver present the reverse challenge. In both markets, MG Properties is concentrating on expense management, carefully structuring concessions and, in some cases, deferring capital plans until conditions improve.

"Both markets are very heavy concession markets," Gleiberman said. "Getting the right balance of concessions, where you're not giving away too much, but still meeting the market with the expectations there," is critical.

He expects Phoenix to regain a more balanced supply-demand relationship in about 12 to 18 months. Denver may take longer, perhaps 18 to 24 months, because demand there has been softer than anticipated even as supply remains elevated.

That does not diminish his longer-term view of either market. Gleiberman described both as desirable and relatively affordable places to live, with appeal to millennials and Gen Z. Phoenix, in particular, continues to benefit from job growth, he said, but has been unable to absorb new units quickly enough to offset the surge in supply.

The takeaway is that MG Properties is not treating operating weakness as a reason to retreat. It is treating it as a condition to manage until the underlying fundamentals reassert themselves.

Scale Before New Markets

MG Properties' approach to expansion is deliberate rather than broad-based. Dallas is the company's newest market, where it has acquired three properties totaling roughly 1,200 units. The company wants to build that presence further before turning its attention to another major expansion.

Gleiberman said MG Properties generally aims for about 3,000 units in a market to support an efficient on-the-ground operating platform and develop the relationships needed with brokers and other local principals.

That threshold underscores an important feature of the firm's strategy: market entry is not just an acquisition decision. It is an operating decision. A scattered collection of assets may create exposure to a fast-growing market, but it does not necessarily provide the scale needed to run a local management organization efficiently. For a vertically integrated owner, the value of expansion rises when the portfolio is large enough to support local teams and reduce overhead per unit.

Historically, MG Properties has added a new market every two to three years. Gleiberman said the company is now studying Atlanta, the Washington, D.C.-Northern Virginia region and Boston, although it is still in an exploratory phase and does not expect to move immediately.

The company spends two to three years studying a market before entering it, he said. Over the next five to 10 years, MG Properties would be satisfied adding two or three new markets while continuing to build scale in the markets where it already operates.

That pace is more cautious than the expansion plans pursued by some multifamily investors during the low-rate era. But it may be better suited to the current market, where success depends as much on operational execution and financing discipline as on finding growth markets.

Regulation And Costs Add Pressure

Supply is the immediate issue, but Gleiberman sees regulation as a more persistent challenge for apartment owners. He cited rent control, restrictions on fees, tougher eviction rules and scrutiny of pricing software as developments the industry must monitor closely.

MG Properties already operates in California, Washington and Oregon, all of which have statewide rent-control frameworks. Gleiberman said rent regulation alone does not automatically make a market uninvestable. The key is the policy's structure and the broader regulatory environment in a jurisdiction.

The company evaluates current and proposed rent-control rules as part of its acquisition decisions, he said.

That perspective reflects a more nuanced calculation facing multifamily buyers. Regulation can affect revenue growth, operating procedures and risk, but it must be weighed against a market's employment base, housing demand, barriers to new supply and long-term demographic appeal. In other words, owners may accept a more regulated environment when the underlying market is strong enough to justify it.

Expense growth is also reshaping the underwriting equation. Labor and materials costs have risen materially over the past several years, Gleiberman said, increasing the importance of operational efficiency. MG Properties is using technology, including AI, cautiously as part of that effort.

The company has centralized elements of the assistant manager role, particularly administrative and collections work, to reduce costs. The move points to a broader evolution in apartment operations: as margins face pressure from concessions, regulations and inflation, owners are looking beyond traditional property-level staffing models for savings.

Source: GlobeSt/ALM