Class A vs. Workforce and Affordable Housing

[Jason Merchey]

I'm considering passively investing in new Class A apartments, 1,000 units, $230m, in Tampa, Daytona Beach, and Dallas, 

OR

A fund that is just getting started that focuses on light-value-add Class B and C, with a goal of up to 50 complexes, maybe about a billion dollars of total value. I hear from that sponsor that with the covid and post-covid economies, Class A should be a "steady Eddie" with plenty of white collar types who can work from home.

Let's assume the operators are solid, and the metro's are solid. 

I'm wondering if Class A is a good bet or a poor one. I also hear from the WFAH sponsor that this is a great strategy that has significant tail winds.

Trying to balance out my Class B value add plays I am involved in at this time.

[Bruce Lynn]

I guess it depends on where the class A is in Dallas.  Lots of class A built over the past 5 years or so.  I'm starting to see rent discounts ..like 1-2 months free rent advertised, so that means things are renting well in all developments.

Everyone seems to be chasing B/C.   I think there are some good opportunities if you can find the right development and right area...and right timing.   In some areas like Irving, the city over the last few years has dogged some developers to tear down C/D developments that were in tougher shape.  That probably helped create a shortage of B/C housing. 

One thing to think about is no one builds B/C.    On the downside I think so many people are chasing these, they get desperate and buy in places that are less desirable in the efforts to "do a deal".