By Craig Johnsen
Few sectors have shifted more over the past five years than multifamily housing. From 2020 through 2022, asset prices climbed at a rate that, in retrospect, far outpaced the underlying drivers of long-term value.
From 2023 through 2025, those same assets gave back much of that appreciation as capital pulled back, lenders grew more cautious and headlines became less favorable. To a casual observer, the sector now looks like one to wait out. If you are deeply embedded in the economics of the industry, however, it could be shaping up to be one of the most interesting setups in residential real estate since the years following the Great Recession.
When Price and Value Stop Moving Together
At its core, countercyclical investing is about recognizing when a gap has opened between the prevailing price of an asset and its long-term expected value.
Price is shaped by large, national forces such as market liquidity, lending appetite, prevailing interest rates, capitalization rates and broker sentiment. All these factors influence how a deal looks on paper at the time of acquisition and how the first year or two of cash flow will read.
Long-term value, on the other hand, is calibrated through a more holistic view of factors influencing the specific market, including local permitting and construction, demographic trends driving tenant demand and economic growth prospects in a given region.
Typically, price and value move in tandem. When they diverge, as they have now, that’s where the opportunity presents itself for savvy buyers that are willing to look beyond headlines.
That distinction is meaningful when you consider the swings on either side of 2022 were almost entirely about price and less so about value. The pandemic-era run-up was driven by a short-term collision of demographic shifts, aggressive rate cuts and a surge of liquidity. The subsequent decline reflected the unwinding of those same conditions. Neither move fundamentally altered the long-term value trend, although some speculated these shifts would have more permanent effects. Demand remains structurally strong, and supply is now contracting in many of the same markets where it took off most aggressively.
That divergence is what we are positioned to capitalize on. While many other funds have pulled back or exited entirely, PPR Capital Management has continued to acquire multifamily and build-to-rent (BTR) properties on the conviction that prices have moved much further than fundamentals warrant.
Take, for example, what’s happening in the Sun Belt. After a few years on the sidelines, we are once again acquiring discounted properties with strong value-add potential. In those markets, new construction has fallen to a level where we expect current oversupply inventory to clear within the target hold period of new acquisitions.
Syndications and funds that overcommitted during the pandemic peak are now facing loan maturities or recapitalizations, with limited capital on hand. Motivated sellers, falling starts and durable demand drivers create a market environment that enables disciplined buyers to acquire assets, execute targeted capital projects and reach stabilization just as excess supply finishes absorbing and new supply remains thin.
What a Real Value-Add Actually Looks Like
Within those markets, the next test is being honest about what actually qualifies as a value-add opportunity. Countless deals surface in the market where the projected returns rest on surface-level changes, such as adding a dog park or upgrading appliances.
Transactions with these inexpensive and obvious upgrades raise a red flag as the existing owner has almost certainly considered them, and rejected them, many times over. Genuinely repositioning an asset, and the most effective way to effectuate an appropriate return, should result in shifting market rent levels.
That requires a comprehensive plan encompassing everything from fresh marketing strategies, updated vendor selection to enhanced operating standards to full unit renovations, technology upgrades and meaningful amenity work.
When well researched and executed, that kind of project delivers more upside in exchange for a more modest initial cash flow profile, without dramatically raising long-term risk.
Infinity at Plaza West, a 224-unit community in Kansas City, is a perfect example of a value-add opportunity generating strong outcomes. The age of the building, inconsistent occupancy, and elevated delinquency made it look, at first pass, like a value-add play without enough upside to justify the risk.
But a closer look revealed that modest capital investment could stabilize occupancy and push rents into a defensible range, generating reasonable returns on their own. Just across the street, Country Club Plaza, a historic landmark that had drifted into vacancy and disrepair, had recently changed ownership, which announced a $1.5 billion redevelopment in partnership with the City.
With limited new multifamily supply nearby, we anticipated the investment could drive a meaningful demand tailwind for our property with no additional capital required on our part. This type of profile, that is not necessarily clean or straightforward but offers consistent returns with a chance at asymmetrical upside, is exactly the type of value PPR sees and applies to its multifamily investment thesis.
Where Investors Should Be Paying Attention
Over the next 12 months, we expect continued below-average rent growth nationally, paired with steady occupancy gains and a noticeable drop in new deliveries as the supply surge, particularly in the Sun Belt, recedes. Credit funds wary of more troubled asset classes will rotate back toward real estate, putting downward pressure on the cost of capital.
Once the cost of debt settles below long-run cash returns on stabilized multifamily properties, core funds should return to the market in a meaningful way. We anticipate a 12-to-24-month window seeing a substantial uptick in deal activity and a corresponding decline in cap rates.
For investors, the takeaway is that the gap between price and value in multifamily and BTR will eventually compress. The firms positioned to capture it are the ones doing the granular work right now: studying local supply pipelines, stress-testing assumptions and separating real repositioning opportunities from cosmetic ones.
Discipline matters more than speed, and conviction matters more than consensus. That is the work we have been doing throughout this cycle, and it is the work we believe will define returns in the cycle ahead.
Craig Johnsen is chief asset officer with PPR Capital Management, a Wayne, Pennsylvania-based private equity firm.