In
this
executive
conversation,
Steven
Katz,
Executive
Vice
President
and
Chief
Investment
Officer
of
Residential
Financing
at
Arbor
Realty
Trust,
shares
his
thoughts
on
the
burgeoning
build-to-rent
(BTR)
market.
Katz
discusses
the
contributing
factors
leading
to
higher
occupancy
rates
in
BTR
properties,
the
advantages
of
BTR
financing
solutions
for
investors,
and
their
long-term
growth
potential.
He
also
offers
valuable
insights
into
the
appeal
of
BTR
communities
and
emerging
markets
to
watch
closely.  

HousingWire:
In
the
current
economic
environment,
what
factors
are
driving
the
higher
occupancy
rates
of
SFR/BTR
properties
compared
to
traditional
multifamily
housing,
and
how
do
these
factors
position
the
SFR/BTR
market
for
sustained
growth?

Steven
Katz:
A
lot
of
the
renters
are
renters
by
choice,
not
renters
by
necessity.
The
credit
profile
of
the
tenant
in
the
BTR
space
is
much
stronger.
With
this
asset
class,
you
are
talking
about
an
average
household
median
income
of
$120,000
or
more.
Many
tenants
living
in
BTR
communities
may
also
own
a
BTR
investment
property
while
renting
a
BTR
property
themselves.
Consider
a
city
like
Dallas
with
suburbs
in
its
outer
rings.
Some
people
couldn’t
necessarily
afford
to
own
in
a
sought-after
school
district,
but
they
could
afford
to
rent
in
that
district
and
will
rent
a
home
to
send
their
children
to
school
there.
That’s
just
one
example
of
how
BTR
offers
access
to
a
lifestyle
that
renters
could
not
afford
otherwise. 

HW:
Can
you
elaborate
on
the
key
aspects
of
BTR
financing
solutions
that
make
them
advantageous
to
investors
today
and
how
these
solutions
might
evolve
to
address
future
market
challenges?

SK:
Construction
lending
is
extremely
complex,
and
in
which
banks
have
traditionally
been
the
dominant
players.
When
you
step
into
construction
risk,
it’s
essential
to
have
a
partner
that
understands
the
market.
Our
team
does
a
great
job
at
demonstrating
how
we
understand
construction
risk
because
we
provide
financing
for
the
entire
lifecycle.
Arbor
can
cover
borrowers
for
10
to
15
years
through
construction
and
permanent
agency
financing,
but
very
few
of
our
peers
have
that
ability.
We
have
also
been
a
bridge
lender
for
decades.
Our
ability
to
work
with
borrowers
to
optimize
their
cash
positions
from
construction
to
bridge
to
permanent
has
earned
us
a
quality
reputation.
Borrowers
trust
that
Arbor
will
successfully
execute
for
them
and
frequently
return
to
us
for
their
next
project.

HW:
With
BTR
properties
generally
being
newer
than
much
of
the
existing
multifamily
space,
what
opportunities
does
this
create
for
investors
regarding
financial
returns
and
long-term
community
impact?

SK:
Historically,
low
tenant
turnover
is
a
huge
opportunity
for
operators.
BTR
properties
attract
and
retain
quality
tenants.
Even
though
they
are
renting,
BTR
tenants
view
the
properties
from
a
homeownership
perspective
and
maintain
them
with
pride.
The
long-term
prospect
of
rent
growth
within
a
BTR
community
is
also
very
high,
as
many
different
demographic
groups
are
now
attracted
to
the
renting
lifestyle.
On
the
one
hand,
you
have
amenity
centers
in
these
communities.
But
on
the
other
hand,
the
home
itself
is
an
amenity.
You
have
the
garage,
yard,
and
storage
space
that
provides
a
lifestyle
you
can’t
get
in
an
apartment.

HW:
As
BTR
communities
attract
lifestyle
renters
across
multiple
generations
(Gen
Z,
millennials,
boomers),
what
are
the
key
elements
of
the
BTR
living
experience
that
resonate
most
with
the
different
age
groups,
and
how
can
developers
and
investors
capitalize
on
these
preferences?

SK:
Nationally,
the
housing
supply
is
woefully
inadequate.
We
are
short
millions
of
homes.
BTR
also
provides
a
pathway
for
people
who
want
to
get
to
their
first
home.
We
will
also
start
to
see
more
55+
BTR
communities
as
many
downsize
into
rental
units
that
require
less
maintenance
but
still
have
ample
space
to
entertain
grandchildren.
Communities
with
two-car
garages
offer
opportunities
for
additional
storage
space
for
the
tenant,
which
is
not
often
available
to
multifamily
tenants.
We
also
see
EV
charging
stations
beginning
to
be
installed
in
BTR
communities
as
sustainability
increasingly
becomes
a
priority
for
many
tenants,
investors,
and
society.

HW:
What
is
your
outlook
on
rent
growth
potential
for
BTR
properties,
and
which
emerging
markets
should
investors
be
watching
closely
for
the
highest
growth
opportunities
over
the
next
several
quarters?

SK:
While
predicting
the
next
several
quarters
is
complicated
due
to
the
uncertainty
over
Federal
Reserve
interest
rate
cuts,
BTR
is
largely
insulated
from
macroeconomic
headwinds.
Arbor
is
very
bullish
on
BTR
in
the
long
run
and
believes
the
sector
will
command
premium
rents
as
corporations
expand
to
more
metro
areas.
Returning
to
the
Dallas
example,
absorption
will
keep
moving
out
in
several
markets.
Regions
like
the
Southeast,
Texas,
and
Arizona
will
remain
steady.
Another
example
is
Nashville,
where
Nissan
has
a
large
plant,
and
Firestone
is
headquartered.
In
communities
where
large
companies
are
building
plants
and
headquarters,
there
will
be
a
growing
need
for
BTR
housing
in
those
markets.

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