In the past few months, great deals have materialized across asset classes as the buyer pool has shrunk and sources of capital have dried up. As a result, more deals are generating attractive in-place cash flow.  Cash-on-cash upon close is more important than IRR and Equity Multiple because cash flow is immediate and reduces risk.  IRR and Equity Multiple are speculative and don’t always materialize.  Irwin Boris, Head of Investments at Heritage Capital Group, has decades of experience across most asset classes. Heritage stopped acquiring multifamily five years ago and has been acquiring warehouses and flex industrial and generating in-place cash-on-cash of 9% or higher. 

Prices on most Real Estate assets have come down significantly over the past year. In multifamily, class C properties in particular have gotten crushed and prices on Class A and B properties have also contracted. Too many sponsors paid too much for properties, overleverages, and got floating rate debt. Over the next couple years, great opportunities will present themselves to invest in high quality assets at discounted prices. If interest rates come down during this period, as many predict, and cap rates follow, big profits will be earned. Mark Hamilton, Chairman of Hamilton Zanze, a multifamily operator of 25,000 units, is bullish on the next few years for what multifamily has in store as absorption, occupancy, and rents increase.

Supply-demand imbalance is what drives value in Commercial Real Estate. In this country, we currently have a severe shortage of affordable housing in many markets. In the case of Mobile Home Parks, the ultimate in affordable housing, supply is actually shrinking because municipalities are repurposing the land Mobile Home Parks occupy for other uses. Nathan Jameson, Founder and Managing Director of ARX Capital, has an incredible track record of buying, improving, and operating Mobile Home Parks in Pennsylvania and surrounding states...

When institutions like pension funds or other groups like family offices invest in Real Estate, they’re looking to invest with best-in-class operators with stellar track records to partner with. They have very specific criteria for asset classes, markets, and operators. Jon Siegel, Co-Founder and Chief Investment Officer of RailField Partners, has developed a strong track record in core plus multifamily assets across growth markets, and has attracted capital from large capital partners as he continues to generate consistently excellent returns.

When it comes to doing larger Real Estate deals, the power of partnerships comes into play. It’s helpful to leverage several sources of capital and specific areas of expertise in order to fund deals and execute on business plans. Scott Jacobson, Founder of Onward Equity, started out as a solo operator in smaller apartment buildings and a small office building in Indiana before joining a networking group and scaling his efforts with other members into larger multifamily buildings across several states. 

It’s difficult to create value when you do whatever everyone else is doing, and hard to find opportunities others haven’t discovered. One such asset class in independent hotels is small, popular tourist towns. Many of these hotels are run by ma and pa operators who have antiquated operating processes and lack the resources to update their properties. By making simple adjustments to operations, and updating the physical premises, there’s huge upside to these properties. Jonathan Twombly, Managing Member of Two Bridges Asset Management, is buying and improving independent hotels and achieving great profitability.

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. Whether its dermatology practices, dentists, dialysis centers, emergency care, eye care, hospitals, veterinary practices, etc., health care is rapidly growing. Ben Reinberg, CEO of Alliance Consolidated Group of Companies, has specialized in Medical Office for the last twenty years and is generating predictable, steady cash flow and strong appreciation for his investors. 

Since mid-2022, Commercial Real Estate prices have been in a freefall. Dramatic increases in Interest rates have pushed prices down, capital has dried up, and the market has come to a standstill. The lending industry, however, is varied and complicated, and no one quite knows what will transpire when loan maturities transpire. Unlike 2008-09, operations on most properties are sound, but unprecedented rate increases will saddle properties with more debt than they’ll be able to service. Brian Burke, President and CEO of Praxis Capital, has been through several cycles, and believes the fallout from this phenomenon will not be as bad as many predict.

In the past few years, great deals for multifamily properties have been few and far between because the prices have simply been too high to make sense. As a result, many inexperienced operators relied on risky financial engineering to make deals pencil and are now paying the price. A lot of these operators are going to lose some, if not all, of their money and take their investors with them. Bruce Fraser, Managing Partner of Elkhorn Capital Partners, has avoided these overpriced assets, and created a smart niche of buying highly distressed properties at deep discounts and turning them around for big profits. Elkhorn Capital oversees over 2000 units across Tulsa and Oklahoma City and plans on further expansion into these markets.

For Real Estate investors who are capitalized enough to acquire properties over the next couple years, a lot of money will be made. Many current operators are over-leveraged and using floating rate debt and are now suffering the consequences. Many of them are losing money and will have to sell at a steep loss. Others are still making money, but not enough to qualify for refinances upon loan maturity, so they will also have to capitulate at a loss. Dan French, 

Managing Director of ATX, sold most of a 15,000-unit multifamily portfolio in 2019 when prices were starting to skyrocket. Now he’s back in the market in search of distressed assets.