Street Smart Success

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.

One of the highest in-demand asset classes is Small Bay Industrial. In the last several years, most of the new industrial construction has been large warehouses to address the growth of e-commerce. Small Bay, on the other hand, has seen very little new construction since 2008/09. Municipalities generally favor new housing. As a result, there’s limited inventory available for tenants, and therefor high occupancy rates across these properties. David Hansel, Founder and Managing Partner at Lucern Capital Partners, started out in multifamily, but now specializes in Small Bay Industrial because of the great attributes of this asset class.

A few years back, retail was completely out of favor. Everyone thought Amazon and e-commerce spelled the end of in-store shopping. The reality on the ground told a different story. Many prominent national retailers were actually growing and opening stores, and in-store sales held steady at 85% of total retail sales. That’s why LBX started investing in open air centers and has done very well in this asset class. Over the last year, LBX has additionally invested in a couple of opportunistic multifamily deals as cracks have started to appear in that asset class. Prices on multifamily have come down significantly as operators are having to sell. Heath Binder is a Managing Director and Head of Investor Relations for LBX.

In the world of private investing, there is a growing plethora of opportunities to generate cash flow. There’s Real Estate equity in single assets or funds, there’s debt funds that provide conservative and consistent cash flow, and there are many opportunities outside of Real Estate. Matt Owens, Founder of Owens Capital Group, has a successful single family debt fund that has generated 8% for years. He has more recently created a fund of Short-term Rentals, and partnerships with an Accounts Receivable agency, a Litigation Finance firm, and a cannabis operator in Maine. Matt helps passive investors maximize the returns they get across several different asset classes while minimizing risk.

The biggest asset class in the world is the U.S. single family housing market. That’s why the health of this asset class has such a large impact on the broader U.S. economy. Over time, single family homes have been one of the most predictable, conservative investments available. In most ten-year periods, home values have almost always gone up in value. Rich Fettke, Co-founder at Real Wealth.com and Author of The Wise Investor, has helped thousands of investors buy single family homes plus 1-4 unit apartments in growing markets all over the country. He finds affordable and growing markets and identifies property management companies to manage your investment. 

Buying sub-institutional size deals entails less competition, and therefore lower prices. In the $3 - $10 million dollar range, competition is mostly local to a specific market with a buyer pool that generally doesn’t include national or regional players. David Hrizak, CEO of The Streamline Companies, buys, builds and manages across various asset classes in Phoenix, the 5th largest market in the country. Over the past three years, David has focused on Class B office and Medical Office. Class B office has been a great category because most tenants can’t afford Class A and don’t require extravagant amenities. Medical Office is a sweet spot that correlates to the aging of our population and the growth of Health Care.

Finding an avenue to high returns can be difficult in saturated markets. Certain markets outside of major metros, however, can provide a unique opportunity for great returns as major metros have become exorbitant for large swaths of owners and renters. Colby Swarz, Vice President of Capital Markets & Investment Strategy of Burkentine Real Estate, builds Planned Urban Development communities with garden style apartments and townhomes that appeal to residents who are looking for a higher quality of life with more space at a lower cost.