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State of the Business 2025: Growth and Resilience at Hamilton Zanze

hamilton-zanze January 21, 2025
Executive Insights Article
State of the Business 2025: Growth and Resilience at Hamilton Zanze State of the Business 2025: Growth and Resilience at Hamilton Zanze

The multifamily real estate market has faced immense challenges over the past four years, and we want to begin by acknowledging their impact on you, our valued investors. The aftershocks of the COVID-19 pandemic, eviction moratoriums, inflation, interest rate hikes, and an unprecedented wave of new supply—nearly 1 million units delivered nationwide in 2023 and 2024—have tested the resilience of apartment owners and operators across the industry. These pressures have influenced occupancy rates, rent growth, and property valuations, creating a difficult environment for many.

Despite these challenges, signs of recovery are emerging. Multifamily completions are projected to decline by over 20% in 2025, easing supply pressures, while the pace of interest rate increases has begun to stabilize, bringing much-needed predictability and encouraging capital to re-enter the market.

Hamilton Zanze is well-prepared to navigate these shifting conditions. With predominantly long-term fixed-rate debt shielding our portfolio from rate volatility, a skilled management team driving operational excellence, and a proven strategy for long-term performance, we are confident in our ability to capitalize on the opportunities ahead.

With that, if asked to summarize my outlook for 2025 in one word, it would be bullish. I am bullish about what this year holds for Hamilton Zanze, for the multifamily industry as a whole, and most importantly, for you—our investors.

Last year marked meaningful progress for our company, and we believe 2025 will be another pivotal chapter. Thank you for your trust as we move forward together with optimism and commitment. We are excited about the promise this year holds and remain steadfast in delivering value for you.

 

Broadening Horizons: Meeting Investor Needs Through Innovation

At Hamilton Zanze, our core business remains firmly rooted in a proven long-term multifamily investment strategy, focusing on high-quality properties in markets with strong economic drivers. Our priorities are clear: preserving capital, generating tax-efficient cash flow, and achieving long-term appreciation. These multifamily investments continue to serve as the foundation of our firm, ensuring stability and value for our investors.

As markets evolve and become increasingly complex, we have taken significant steps over the past year to expand our investment platform. By launching the HZ Evergreen Fund, re-entering the San Francisco market, and exploring private credit opportunities, we have demonstrated our commitment to innovation while remaining true to our core values. By blending consistency with forward-thinking solutions, we are better positioned than ever to deliver the products and opportunities investors seek.

Below, we dive into the key areas of growth that will shape Hamilton Zanze in 2025 and beyond.

 

The HZ Evergreen Fund

In 2024, Hamilton Zanze introduced the HZ Evergreen Fund in response to growing investor demand for greater diversification, predictable income, and streamlined estate planning. Building on our proven one-off 1031 exchange strategy, this innovative fund allows existing investors to contribute their real estate holdings with Hamilton Zanze at market value in exchange for shares in a diversified fund. The fund retains the tax benefits of 1031 transactions while enhancing the advantages of owning real estate.

Hamilton Zanze will carefully curate the fund from our portfolio. We will select from apartment communities that span 22 metropolitan areas and have a combined net asset value of more than $1 billion. The HZ Evergreen Fund provides long-term capital appreciation, portfolio flexibility, and broader access to expertly managed assets, reflecting our commitment to deliver innovative solutions for investors.

 

Revere Housing & Dislocated Markets

Our investors have expressed a strong interest in opportunities within dislocated markets, and we’ve listened. In 2024, we identified significant mispricing in San Francisco, presenting what we believe is one of the best trades in the country: the opportunity to acquire high-quality real estate at values below historical levels. To capitalize on this, we established Revere Housing, which is dedicated to acquiring dislocated real estate and loan notes in high-demand, rent-controlled urban markets, particularly in California. Revere’s initial venture was established with two international financial institutions to add value to a large urban portfolio. This initiative not only provides investors with access to unique opportunities but also aligns with our commitment to address critical housing challenges and expand our footprint in key regions.

 

Private Credit

In recent years, many investors have sought opportunities in private credit for its fixed-income-like characteristics paired with equity-like returns. To address this demand, we partnered with Limekiln Real Estate Investment Management to form a joint venture that sponsored the acquisition of securities in Freddie Mac K-165, which is a pool of 10-year, fixed rate, stabilized multifamily loans. The securities are collectively known as the “B Piece.” This innovative move strengthens our ability to deliver alternative investment options that enhance portfolio diversification and capitalize on emerging opportunities. Looking ahead, we plan to expand our offerings in private credit on a programmatic basis, ensuring our investors have greater access to this dynamic asset class.

 

Portfolio Growth

Apartment investment sales have been subdued in recent years, although the pace of transactions improved in the latter half of 2024. In the third quarter, investment sales totaled $35.8 billion, a year-over-year increase of 9.3%, according to Newmark.

Hamilton Zanze took a measured approach to portfolio growth in 2024, sponsoring the acquisition of seven apartment communities totaling more than $453 million in value. We also sold five properties with a combined value of over $171 million. In addition, Revere Housing formed a joint venture that acquired the management and operation of a San Francisco portfolio totaling more than 1,200 units.

Looking ahead, we anticipate more transaction activity in 2025. The Fed’s easing monetary policy is likely to increase investors’ risk appetite, leading to more equity deployment into multifamily assets. In addition, we are receiving renewed interest from institutional partners with capital to deploy. Lastly, big banks are back, and they’re going to be active lenders, which will facilitate a brisker pace for investment sales.

At Hamilton Zanze, we aim to sponsor the acquisition of approximately $1 billion in apartment communities this year, translating to roughly a dozen properties, while projecting $250 million in asset sales.

Our strategy remains focused on sponsoring the acquisition of properties at a significant discount to replacement cost in markets with sustainable job creation. We see strong potential in the West and the Southeast.

We forecast that Revere will sponsor the acquisition of another portfolio or two—most likely in San Francisco—to expand its portfolio significantly.

 

Financial and Operational Performance

The multifamily market continues to operate in a dynamic and challenging environment shaped by fluctuating interest rates, new supply, and shifting economic conditions. While the past year presented headwinds for rent growth and occupancy, signs of stabilization are beginning to emerge.

One key factor influencing the market is the 10-year Treasury note, which we anticipate stabilizing in the 4%–4.5% range. Such stability could encourage sidelined capital to re-enter the market, driving investment activity. However, if volatility results in fluctuations between 4.75% and 5.25%, cap rates may expand, potentially slowing deal flow. Even in such scenarios, we expect institutional investors to remain active, with private credit playing an important role in supporting transactions.

Amid these external pressures, Hamilton Zanze’s portfolio has demonstrated resilience. Occupancy levels across our communities stand at approximately 93% as of this writing, with rent rolls increasing by about 1.8% year-over-year as of December 2024. We continually monitor each property’s occupancy, and we are encouraged by steady leasing activity and ongoing operational improvements.

Looking ahead, we are proactively addressing challenges and seizing opportunities. We are partnering with Mission Rock Residential to enhance operational efficiencies and manage capital expenditures. Additionally, the pace of new construction is slowing, which we anticipate will ease competitive pressures on existing communities, leading to stronger rent growth and improved net operating income.

One area of significant improvement is insurance costs. After years of sharp increases, we achieved a 17% reduction in premiums at the year-end renewal, providing welcome relief. Hamilton Zanze remains committed to securing best-in-class coverage at competitive rates by utilizing a layered program with participating insurers in London, Bermuda, and the U.S. Additionally, our liability insurance is sourced from multiple domestic carriers to further optimize value for our portfolio.

 

Strengthening Our Foundation for Long-Term Success

In 2024, Hamilton Zanze undertook a strategic realignment of our operations to enhance efficiency and better align with our long-term goals. These changes, including workforce adjustments, were carefully considered and implemented to ensure the firm’s continued success and to strengthen our foundation for future growth.

Throughout this process, we remained committed to supporting our team with robust educational, training, and mentoring resources, ensuring our work reflects the excellence you expect from Hamilton Zanze.

We also listened closely to feedback from our recent NPS survey, which identified both strengths and areas for improvement in the investor experience. In response, we are addressing key themes such as preserving direct investor access to our team, improving communication, increasing transparency, and refining our processes to better serve your needs. Additionally, we are thrilled to bring back our beloved investor appreciation events, offering meaningful opportunities to connect with you personally.

These initiatives, coupled with our focus on operational excellence, reflect our ongoing dedication to improving the investor experience. Together, we look forward to building on our successes and navigating the road ahead with confidence.

 

A Promising Future

Looking further ahead, beyond 2025, the delivery of new units is expected to decline significantly due to tightened construction lending conditions. By late 2026 and into 2027, we anticipate this will create more favorable market conditions, with higher occupancy rates and stronger rent growth across existing apartment stock.

This outlook underscores the importance of being strategically proactive with acquisitions in 2025.

As we embark on another year, Hamilton Zanze is focused on delivering value and adapting to the evolving needs of our investors and institutional partners. With the multifamily industry poised for growth, we remain steadfast in our commitment to disciplined investment, operational excellence, and building enduring relationships with our stakeholders.

We appreciate your trust and partnership as we continue this journey together.

 

 

Kurt Houtkooper
CEO