🏘️ Can manufactured homes solve the housing crisis?

👋 Hello, Best Ever readers! The Fed voted unanimously Wednesday to hold the benchmark interest rate steady, ending a streak of rate cuts. The next Fed meeting is scheduled for mid-March.

In this week’s newsletter, manufactured homes shine, the office market rebounds, and retail giants close up shop.

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Off we go!

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CRE HEADLINES

📈 Office Uptick: U.S. office building sales increased 20% to $63.6 billion in 2024 from 2023, marking the first increase since 2021 but still well below the 2015-2019 average of $142.9 billion. Brokers expect activity to accelerate in 2025 with $196.8 billion in opportunistic real estate funds available, up from $179.9 billion in 2020.

💸 Fundraising Flops: The CRE fundraising volume of $80 billion in 2024 was the lowest since 2016 and down from its peak of $155 billion in 2021 as investors await the market bottom. Despite overall decline, core funding reached a record $9.5 billion, and increased fund competition signals potential recovery, particularly for premium properties.

🌊 Investment Surge: A recent CBRE survey reveals 70% of investors plan to increase CRE acquisitions in 2025, primarily targeting Dallas, Miami, and Boston. Multifamily leads preferred sectors, while traditional markets like San Francisco and NYC regain favor despite high interest rates.

💥 Hotel Boom: The U.S. hotel construction pipeline has hit a record high with 6,380 projects and 747,000 rooms in development, up 8% from 2023. The upper midscale segment leads with 2,350 projects, while conversion projects hit an all-time high of 1,340.

📊 Growing Rent Gap: SFR rentals now command a record 20% premium over apartments, costing $350 more monthly, according to Zillow’s latest market report. It’s the largest difference ever recorded by Zillow, as SFR rents have surged 41% since pre-pandemic, far outpacing the 26% rise in apartment costs.

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CAN MANUFACTURED HOMES SOLVE THE HOUSING CRISIS?

America's housing affordability crisis has reached critical levels, with the median home price now requiring an annual income over $150,000 in many metropolitan areas — double the national median income of $75,000. This challenge affects both middle-class homebuyers and renters, with a record 22 million households spending over 30% of their income on housing and utilities.

Rising housing costs have dramatically outpaced income growth. Between 1995 and 2022, median household income increased by 120% while median home prices rose by 230%. Nationally, there is a shortage of more than 7 million affordable homes for our nation's 10.8 million plus extremely low-income families.

While some are converting old hotels into workforce housing and renovating other Class B and C multifamily, many are touting manufactured housing communities (MHCs) as the critical piece to the affordability puzzle, presenting a unique opportunity for investors.

• The Opportunity: Modern MHCs can deliver affordable housing at scale, particularly in markets facing severe supply constraints, while recent innovations in design and construction have elevated the quality and appeal of manufactured homes. They offer a scalable solution that can help bridge the affordability gap.

• Strong Fundamentals: Anchored by stable cash flow with comparatively low vacancy vs. traditional multifamily, MHC investors benefit from growing demand, low operational costs, value-add potential, and tax advantages.

• Bonus Appreciation: Manufactured homes are appreciating much faster than site-built homes. According to HUD data, prices for manufactured homes have risen by nearly 60% over a five-year period, while the average sales price of new site-built, single-family homes (excluding land) rose by 37.66% over the same period. 

The Changing Perception of MHCs: "When I first entered this industry, filling vacant sites was a challenge — financing options were scarce, and trailer parks carried a stigma,” said Matt Ricciardella, founder and managing partner at Crystal View Capital, which owns and operates 45 MHCs, totaling more than 6,000 sites across 15 states. “Over the years, that stigma has dissipated in a major way. Today’s new communities are beautifully designed, offering amenities and spacious lots, which has elevated the appeal and acceptance of manufactured housing."

WHAT IT ALL MEANS

The affordability crisis requires innovative solutions that balance investor returns with social impact. MHCs present a unique opportunity to achieve both objectives, offering a sustainable path toward increasing America's affordable housing stock while generating stable, long-term returns for investors.

👉 To learn more about Crystal View Capital’s vision and its latest fund offering, click here.

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PERKS ON PERKS ON PERKS

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• Best Ever Community: You get free access to this all-new digital space exclusively for the best and brightest minds in CRE. Get private access to CRE experts and start networking with investors who play at your level today. Then, continue to foster the same energy from the Conference all year round!

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• Sessions Recordings and Handouts: Get access to main session recordings and handouts from our stellar lineup of speakers and educators so you can take the biggest moments home with you!

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RETAIL GIANTS ARE CLOSING UP SHOP

U.S. retail store closures hit their highest level in 2024 since the pandemic, and the trend is expected to accelerate into 2025. This surge comes despite strong consumer spending, highlighting a growing divide between retail winners and losers in an evolving marketplace.

• In 2023, the retail landscape saw 25 retail bankruptcies, marking a relatively stable year.

• In 2024, we witnessed 7,325 store closures and 51 retail bankruptcies. The most significant closures came from Family Dollar, CVS Health, Conn's, rue21, and Big Lots. Notable bankruptcies included Party City and several specialty retailers. However, store openings also reached a record 5,970 locations, led by Dollar General, Dollar Tree, 7-Eleven, Oxxo, and Five Below.

• Projections for 2025 indicate approximately 15,000 store closures. Already by January 10, 2025, retailers announced 1,925 closures, with Party City, Big Lots, Walgreens, 7-Eleven, and Macy's leading the reduction. Store openings are expected to remain stable at around 5,800 locations.

While retail sales grew 4% during the 2024 holiday season, reaching $994.1 billion, the benefits are increasingly concentrated among fewer retailers. Giants like Amazon, Costco, and Walmart continue to gain market share through value and convenience, while specialty retailers struggle against rising costs and online competition, particularly from emerging players like Shein and Temu. 

This consolidation of retail power, combined with changing consumer preferences and high fixed operating costs, is forcing many traditional retailers to downsize or close entirely, despite overall healthy consumer spending, resulting in a complicated retail picture and a clear divide between those that are thriving and those closing up shop.

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$5 MILLION INCREASE IN VALUE, 36% IRR, AND A 2.3X EQUITY MULTIPLE IN JUST 3 YEARS

Jeremy Porto and the team at Astra Equity have nearly doubled the value of this property in three years with a sale or re-finance just around the corner in 2025.

Here's how they did it 👇

🏢 Property Details: This 86-unit Class C multifamily property was purchased in May 2022 and is located in Birmingham, Alabama.

💸 Finances: The property was purchased for $6.1 million. The team raised $1.9 million in capital and used a local bank for a quasi-bridge loan with approximately $5.7 million in loan proceeds (80% of purchase price + 80% of renovation costs), a 4.15% interest rate, 30 months IO, a seven-year term with no pre-payment penalty, 25-year amortization, and flexible renovation draws.

💼 Business Plan: The builder put standard builder-grade materials in the units in 1999 that had not been touched since. So, Astra renovated all unit interiors, which included LVP flooring, paint, countertops, appliances, hardware, plumbing, and lighting fixtures.  Exterior renovations included adding a dog park and cleaning up the landscaping.

They converted the office to an 87th unit, which generated another $1,300/mo in revenue. They also added additional income streams such as utility bill-back, liability insurance, and standard admin fees that did not exist at the time of purchase.

🍾 Results: Astra initially projected an 8% average CoC return and has consistently distributed in the low 9% range since the start. They are approaching either a sale or refinance this year and expect the value to be close to $11 million based on an extremely conservative 6.5% cap rate, which is an almost doubling of value since the purchase date. Assuming this value is achieved at the time of sale, investors will realize a 36% IRR and approximately a 2.3X equity multiple after just three years.

If you have a deal you'd like to feature here, respond directly to this email with “deal breakdown.”

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FREE DOCUMENT DOWNLOAD

If you want to achieve massive levels of success in multifamily syndication or real estate investing in general, you must have a consistent thought leadership platform. Here is a quick guide on why, along with the steps you can take to establish your personal brand.