🥇 $403M apartment deal leads a down year

👋 Hello, Best Ever Community!

In today’s newsletter, a $403 million apartment sale leads a down year and one investor scores a 181% total return on a Texas multifamily deal.

Plus, join us on Thursday, February 29 for a free webinar on Priority & Profit: The Power of Preferred Equity hosted by Darin Davis of Club Capital. We’ll discuss the advantages of preferred equity and how it can be a Trojan horse in the capital stack for smarter investment decisions. Register today!

Off we go!

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CRE HEADLINES

🛎 Airbnb’s AI Shakeup: After acquiring AI startup GamePlanner.AI, Airbnb plans to leverage generative AI to provide a more personalized experience for its users, creating the “ultimate concierge.”

🏭 The Future of Industrial: The industrial sector is moving in a new direction, with advanced manufacturing emerging as the wave of the future while warehousing and distribution take a back seat.

📉 A $10 Million Loss: Marcus & Millichap posted a $10.2 million Q4 loss to become the latest brokerage firm to outline the effects of higher borrowing costs and lower CRE demand.

💌 New WeWork Suitor: Rental platform Rentberry has thrown its hat into the ring with “plans to explore” making an offer to buy bankrupt WeWork.  

💩 Multifamily Loan Quality Deteriorates: Problems are brewing in certain areas of multifamily because of high refinancing costs, as loans past due or on non-accruing status are still below long-term averages.

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$403M APARTMENT DEAL LEADS A DOWN YEAR

U.S. apartment transactions tanked in 2023, dropping 61% year-over-year, according to RealPage data. With the rising cost of debt and general economic uncertainty as key contributors, volume was well below the record-setting sales that averaged $332 billion per year in 2021 and 2022 after the onset of the pandemic. Despite the fall, transaction volume was still above pre-pandemic averages.

🔎 Inside the Numbers: About 25,000 total properties changed hands in 2021 and 2022, compared to merely 5,400 in 2023. The $119 billion transaction total pales in comparison to the previous two-year average of $332 billion, while the average price per unit dropped 13% to $204,216 in 2023. Cap rates, meanwhile, rose 60 basis points to 5.3%, still the lowest among major property types.

🤑 A $403 Million Deal: Among the top six deals of 2023—each of which transacted at more than $200 million—the sale of Solow Tower Apartments in New York took the cake when Black Spruce Management acquired a 45-story, 322-unit residential tower in Manhattan’s Upper East Side for approximately $403 million, roughly $1.25 million per unit.

💸 The Best of the Rest: The other five transactions of more than $200 million were peppered throughout the nation, with two in Southern California and others in Chicago, Miami, and Washington, D.C.

What It All Means

🎭 It wasn’t all bad in 2023. The average price per unit may have fallen to 13%, but that was still well above the $151,000 average in the five years before the pandemic. Meanwhile, the average cap rate (5.3%) in 2023 was the highest in four years. Consider these little victories in an otherwise forgettable 2023. But with both supply and demand projected to remain strong and a wave of multifamily loans headed for delinquency—and with interest rates (allegedly) set to come down—we’re likely to see a higher transaction volume in 2024, yet another small win for multifamily.

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FREE WEBINAR

The current debt and equity market has created an investor opportunity that hasn't been available in over 10 years.

With higher interest rates and tighter regulations among lenders, demand for preferred equity financing is rising, creating opportunities for issuers and investors alike. This webinar will dive into the intricacies of preferred equity, and how it gives investors a front-row seat to returns, priority status, and immediate cash flow.

🎓 In this 30-minute webinar, we’ll cover:

• Cash Flow Clarity: Learn the distinction between current pay and deferred pay to optimize your revenue streams.

• Position Priority Decoded: Understand how preferred equity can be a Trojan horse in the capital stack for smarter investment decisions.

• Aligned Sponsorship: Identify the right sponsor that structures the deal with your vision of investment success. 

• Investment Benefits: Discover the advantages of preferred equity, such as immediate cash flow, short-term investment, and capital preservation.

👉 Register here to join us at 2 p.m. EST on Thursday, February 29. 

Can’t make it on February 29? Register anyway, and we’ll send you the replay. 

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181% TOTAL RETURN ON TEXAS MULTIFAMILY DEAL

Shane Thomas sold this property after five years at a 2.8 equity multiple, 181% total return, and over a 100% increase in valuation. Here's how he did it. 👇

🏢 Property Details: 142-unit Class C asset in a strong employment and retail hub purchased in Texas in 2018 at 97% occupancy. The property is located near acclaimed schools in a family-friendly area.

💸 Finances: $4.3 million in capital raised. 

💵 Debt Structure: Fannie Mae loan (Texas is a non-disclosure state).

💼 Business Plan: With a CapEx budget of over $1 million, Shane added value by tackling deferred maintenance, adding new paint, making interior renovations, and improving amenities such as outdoor areas and covered parking. Enough value was added to raise rents by 25%. 

🍾 Results: Shane refinanced in year three with 110% cash out, generating infinite cash-on-cash returns. He sold the property in 2023 at a 2.81 equity multiple, 181% total return, 39% AAR, and 34% IRR. He was able to increase the property’s valuation from the purchase price by more than 100%. 

If you have a deal you'd like us to feature, share it with us!

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⭐️ Kyle Matthews — Founder, Chairman, and CEO of Matthews Real Estate Investment Services, the largest privately held brokerage platform in the U.S. with more than 20 offices and over 600 personnel nationwide.

⭐️ Jim Pfeifer — Founder, President, and CEO of Left Field Investors. Formerly a financial advisor, Jim believes in community personal finance and founded Left Field Investors to promote passive investment in real estate syndications through knowledge sharing, networking, and continuous learning.

AND 40+ other industry leaders… all in Salt Lake City this April.

Sharing their insights and strategies for success in 2024 and beyond.

It will be three+ life-changing days. And we don’t want you to miss it.

Secure your seat today before it’s too late! Coupon code BESTEVER24 saves you 20%.

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FREE DOCUMENT DOWNLOAD

💸 Everything You Need to Know About Rule 506 of Regulation D

Regulation D (also referred to as Reg D) includes two important exceptions to the general requirement securities registration with the SEC set forth in the Securities Act of 1933. Through Reg D, you can raise capital from investors without having to register the securities (i.e., the securities you are selling to your investors to fund your deal) with the SEC.

👉 Download now!

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Wishing you a Best Ever day!

—Joe Fairless