How the multifamily industry could perform in 2025 with a Q&A from Ashcroft Capital’s Frank Roessler who has cautious optimism for 2025.
Editor’s note: As the founder and CEO of New York-based Ashcroft Capital, Frank Roessler leads a fully integrated multifamily investment firm that owns and operates approximately 14,000 apartment homes across the Sun Belt states of Georgia, Florida, North Carolina and Texas. In this Q&A with Rental Housing Journal, Roessler offers his take on how the apartment industry could perform in 2025, reviews Ashcroft’s 2024, outlines the company’s goals for 2025 and details the multiple benefits of his firm’s centralized procurement department.
As you look ahead to 2025, what do you think is in store for the apartment industry in the coming year? What do you expect in terms of operating fundamentals and the pace of investment sales?
Roessler: I would describe my outlook as one of cautious optimism. The past couple of years have certainly been challenging for the apartment industry, as a big increase in the delivery of new units has caused an uptick in vacancy rates and softened rent growth. Also, high interest rates have dramatically slowed the pace of investment sales.
But various data points indicate that 2025 could represent an improvement in both operating fundamentals and investment sales volume. We’re seeing a slowdown in the delivery of new apartment communities, and the existing supply is being absorbed, although more slowly than one would hope. This dynamic combined with the ongoing resilience of the U.S. economy could set the stage for more significant rent growth.
At the same time, an uptick in Treasuries may create headwinds as this will adversely impact values and create a further bid-ask spread. This piece of the puzzle will play out as the year rolls on. If inflation continues to come down and the economy cools moderately, we will likely see transactional volume increase. If this happens, 2025 could mark a return to a fairly normal year when it comes to investment sales. Not a historic year, but a normal one.
How would you summarize Ashcroft’s 2024, and what are your company’s goals and plans for the next 12 months?
Roessler: Ashcroft had a strong 2024. We were laser-focused on strengthening our platform of vertical integration, our staffing and our onsite operations.
And given the overall climate, we’re satisfied with our activity in the investment sales market. We completed two acquisitions in the latter part of the year. We recapitalized The Avery, a 20-year-old garden-style community in the Dallas-Fort Worth metroplex. The recapitalization took place when the previous owner—a joint venture between a private equity limited partner and us—sold the property to a joint venture between Ashcroft and Virtus Real Estate Capital. In August, we also acquired Halston Waterleigh, which is a garden-style community just outside of Orlando, in Winter Garden, Florida.
Looking ahead to this year, we are currently under contract to acquire three apartment communities in the first quarter, and we’re also slated to sell two properties as well. Our goal is to acquire a total of five to eight properties this year while remaining disciplined, strategic and conservative in our underwriting.
Ashcroft touts its centralized procurement department as one of the company’s unique characteristics. Describe how that program works.
Roessler: One of our goals is to improve the resident experience at our communities after we acquire the properties. We strive to achieve that by optimizing onsite operations and undertaking thoughtful, strategic renovations of the homes and common-area amenities.
Through our in-house procurement department, we are able to source and acquire renovation materials directly from overseas manufacturers, which provides roughly a 30% discount when compared to buying in bulk from U.S. retailers. All things being equal, this enables us to pass along higher returns to our investors, and it also allows our company to navigate international supply chain disruptions, as well as domestic disruptions like hurricanes and other severe weather events.
Looking beyond 2025, do you see any particular challenges in store for the apartment industry? What is your assessment of the sector’s long-term health?
Roessler: I certainly can’t predict the future. I don’t have a crystal-clear crystal ball. But the available information would indicate that multifamily investment fundamentals remain strong compared with other asset classes. New supply appears set to fall in the coming years, which would help operations, and the cost of buying a home, in an era of still relatively high interest rates, would seem likely to support strong renter demand.
As far as challenges, the Treasury market continues to serve as a headwind for our industry.
About the author:
Frank Roessler is the founder and CEO of New York-based Ashcroft Capital.