Nothing has caused more loss of principal in Real Estate than too much debt. Leverage works great in an upward trending market, but it cuts the other way in a downturn.  Joel Friedland, Principal of BRIT properties, has been buying infill industrial properties with all cash since learning the hard way during the 2008-09 financial crises. Joel and his investors are seeking conservative investments with the primary goal of capital preservation. He buys highly sought-after properties that appeal to both owner-users and tenants. Joel specializes in industrial properties in Chicago that deliver 7% unleveraged returns.

AI will change the world even more than the internet, with profound implications for most aspects of society, including massive wealth creation. It will impact many sectors of commerce, including Real Estate. Amongst other implications, AI is creating an insatiable demand for Data Centers and a scramble for computing power. Peter Lewis, Chairman and Founder of Wharton Equity Partners, has over 35 years of experience as a real estate owner, developer, and operator, and is now merging with Lighthouse, a turnkey developer of Data Centers. The founders of Lighthouse formerly led Midwest and Western data center development for Amazon Web Services.

For fix and flip entrepreneurs of single-family homes, it’s hard to get financing from traditional lenders. This lack of access to capital creates a market for private lenders who have the flexibility and access to capital. It’s a win-win for borrowers and lenders. Borrowers get capital to fund their businesses; lenders make a healthy return for making these kinds of loans. Investors who invest in hard money funds also do well, earning sometimes as high as high teen returns. Matt Medrano, Co-founder and CRO of Dynamo Capital, has a growing fund of hard money loans, mostly in Wichita, and is expanding to other Midwest cities.

Although cracks are starting to appear in various commercial real estate asset classes, prices have still not come down enough to be investible. Prices have come down, but they’ve come down off record highs and lenders are still conducting workouts with sponsors. If we continue to see significant job losses, and recession ensues, prices may eventually come down enough to make sense for cash-flow investors. Jeremy Roll, a full-time passive investor, left his steady corporate job in 2007 and has lived 100% off the cash flow ever since. Jeremy has been in over 250 passive investments.

Despite its initial trajectory, ecommerce has plateaued at 16% of total retail sales. Concurrently, the cost of land, borrowing, and construction has made it prohibitive to build new retail centers. As a result, occupancy levels at existing properties are in the mid-high 90’s, and sometimes even 100%. There’s a huge demand for space from restaurants, beauty salons, yoga and pilates studios, gyms, massage clinics, plus other medical providers like dentists and chiropractors.  Cyndi Peach, Managing Partner of Nexphase Venture Partners, has had successful exits of strip centers over the past decade and continues to build her portfolio.

When it comes to stable tenants and predictable cash flow, it’s hard to find a better asset class then Medical Office. As the population ages and people live longer, the demand for medical care will continue to flourish. Plus, technology will never replace the human body. Another commercial real estate class with predictable cash flow is Multifamily. Multifamily is attractive because of looming loan maturities and resulting distress.  Ben Reinberg, CEO of Alliance Consolidated Group of Companies, has specialized in Medical Office for the last twenty years and is now capitalizing on Multifamily to leverage current buying opportunities to acquire great properties for less than replacement costs. 

Although Multifamily is facing challenges in sunbelt markets, and loan maturities are piling up, long-term fundamentals remain strong. Rents are holding, occupancy levels are in the low 90’s%, and collections are solid. There have been concessions because of excess supply, but even these are gradually starting to contract. Joe Fairless, Co-founder and General Partner of Ashcroft Capital, owns over 14,000 units in sunbelt markets. Joe is prioritizing Net Operating Income of his current portfolio and is selectively looking to acquire additional A to B+ properties with a large discount to replacement cost. 

As investors seek alternatives to the stock market, as ETFs make it harder to outpace the market, as awareness for private investments increases, allocations are increasing to non-traditional assets. Over the past decade, and even more so recently, investors have invested more money into privately held Real Estate, Private Credit, and Private Equity. With the right investment strategies, these vehicles offer predictable cash flow with conservative risk. Brad Johnson, Founder and Managing Partner of Evergreen Capital, helps clients preserve and grow capital by investing in proven, cash-flowing alternative investments.

As investors have become frustrated over the complexity, the legacy issues, and opacity of funds, many have gravitated to investing in single asset deals. Single assets are easier to underwrite, require less due diligence, and great deals are starting to emerge with distress in the market. Mike Zlotnik, CEO of TF Management Group, is offering investors opportunities to invest in single asset deals in Industrial, Outdoor Retail, and select Multifamily. Mike also manages conservative debt funds that he’s run for several years.

Although there’s been resistance to investing in office since the pandemic, back-to-office trends are prevailing as more employers are requiring employees to come back in-person at least three days per week. Along with this trend and no new supply, quality office space is seeing resurgent demand, especially higher quality space in great locations. Investors are now seeing opportunities to acquire these properties for as little as 10% of previous sale prices with strong in-place cash flow and high upside. Nate Melchior, Principal at Dunton Commercial, is actively pursuing office acquisitions in the Denver market. Dunton Commercial currently owns and manages retail and office properties in Colorado.