🪑 CRE giants playing 'musical chairs'

👋 Hello, Best Ever Community!

In today’s newsletter, CRE giants play ‘musical chairs,’ John Casmon asks the tough questions, and Ian Cruz details how he boosted one property’s value by $200,000.

➡️ Plus: Want to promote your business to 20,000+ investors? Here’s your chance! The first reader to refer 30 new subscribers to the Best Ever newsletter by March 31 will win a dedicated branded email sent to our audience of 20,000+ subscribers. Learn more below!

This week’s newsletter is brought to you by Viking Capital, a multifamily boutique with nimble investment sourcing, structuring, execution, and asset management capabilities. Learn more about Viking Capital here.

Let’s CRE!

_{🗞 NO-FLUFF NEWS}
CRE HEADLINES

🏢 Everything’s (Vacant) in Texas: Houston, Dallas, and Austin are the three most-vacant office markets among U.S. metros, and millions of square feet of expiring leases and dozens of new projects won’t help.

🏘 Affordable Housing Breakthrough: The low-income housing tax credit could see the most significant reform in its 38-year history, leading to the creation of approximately 200,000 new affordable housing units nationwide.

🏙 The Sky’s the Limit: U.S. cities added more than 2,900 buildings with more than 200 apartment units between the years 2021 and 2023, as properties are getting bigger and taller to feature more units to increase profits.

☀️ Turning Point for CRE: Despite struggles with falling valuations due to pandemic shifts and inflation-fighting measures, some analysts foresee opportunities for commercial mortgage-backed securities.

🚫 No Rate Cuts Yet: Fed Chair Powell emphasizes caution on inflation, indicating no immediate plans for rate cuts until the Fed has “gained greater confidence that inflation is moving sustainably toward 2%.”

_{⭐️ TOP STORY}
CRE GIANTS PLAYING ‘MUSICAL CHAIRS’

There’s been a significant shake-up among commercial real estate (CRE) industry leaders recently, and it’s not limited to just one sector. Big names in the brokering, management, and lending arenas have made some major moves.

🚚 Parting Ways: Notable shifts include Darcy Stacom's departure from CBRE to establish her own firm, JLL's abrupt removal of Bob Knakal, and Marty Burger, the former CEO of Silverstein Properties, embarking on a new real estate venture with Andrew Farkas. Additionally, Paul Darrah transitioned from Google to helm Citadel’s real estate operations, while Jonathan Pollack left Blackstone Real Estate Credit to assume the role of president at Starwood Capital Group. And the list goes on. 

🌩️ The Situation: CRE turnover isn’t unusual in a downturn, but the steep decline in deal volume is putting pressure on brokers and firms alike. Many brokerages experienced revenue drops in 2023, with Cushman & Wakefield seeing a 6% decline and JLL's revenues remaining flat at $20.7 billion. Newmark's total revenue dipped by nearly 9% to $2.47 billion, while Marcus & Millichap's revenues plummeted by roughly 50% to $645.9 million, leading to significant staff attrition. Amid financial distress, CRE professionals are exploring new opportunities, questioning their current firms' longevity.

🔮 What’s Next? Is a new generation of investment sales professionals emerging? Will brokerages continue prioritizing this business sector during downturns? Despite these uncertainties, brokers all seem to agree that the market will eventually rebound, and both firms and professionals aim to be prepared for the resurgence of investment sales. Adelaide Polsinelli, Vice Chair of Compass, predicts ongoing movement and uncertainty — likening the current situation to a game of musical chairs — and suggests that stability will only come once the market settles.

What It All Means

Real estate is ultimately a relationship business. This changing landscape will likely favor those who are collaborative and creative enough to expand their networks accordingly and remain competitive in a low-deal volume market.

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_{✍️ BEST EVER BLOG}
FROM JOHN CASMON

Whether you're just starting or have years of investing experience, you are always on the hunt for the perfect deal. But if someone put the perfect real estate deal in front of you, would you even believe it? Would you even know it was perfect? What questions would you ask? 

If you find yourself hesitating when reviewing deals, it’s likely because you haven’t clearly defined your investing principles. Without a solid framework guiding your decisions, it's easy to fall prey to analysis paralysis and indecision. That's why you must ask the right questions — ones that align with your personal goals and risk tolerance — before diving into any investment opportunity.

📈 How do the projected returns compare with the actual risks? Investing inherently involves risk, and assessing the potential returns against these risks is paramount. For example, a ground-up construction project has more risks than an existing, cash-flowing multifamily property. Therefore, you would expect to see higher projected returns for the ground-up project than the existing multifamily.

💸 How can I lose money on this investment (and what can be done to mitigate that loss)? Understanding the various ways an investment could go sour is essential for risk management. Whether it's market volatility, regulatory changes, or operational challenges, identifying the potential pitfalls allows you to proactively devise mitigation strategies.

🏆 Will this investment get me closer to my end goal, even if I don't receive the projected returns? Investing is not just about maximizing returns; it's about achieving your broader financial objectives. Even if the anticipated returns fall short, if the experience and relationships build your confidence and get you closer to your long-term objectives, it may still be a valuable endeavor. 

👉 View the full article here.

_{🏠 DEAL BREAKDOWN}
STRATEGIC PROPERTY OVERHAUL ADDS $200K IN VALUE

Ian Cruz, CPA, and his team added over $200,000 in value to this six-unit property and increased rental income by 46% in less than six months. Here's how they did it. 👇

🏢 Property Details: Six-unit Class C property purchased in August 2022 in a Class B neighborhood in Cincinnati, OH. The prior buyer got cold feet and backed out. Joseph Cornwell (Best Ever Show host) represented them through the transaction.

💸 Finances: The purchase price was $375,000 with $0 in capital raised.

 💵 Debt Structure: 75% LTV, 5.5% interest rate, 25-year amortization. 50/50 JV. 

💼 Business Plan: In the first six months, the team changed property management, allowed three tenants to vacate upon change, renovated empty units, and filled vacancies at market rate. After the first six months, they raised existing rents to market rate and renovated the fourth unit as another tenant moved. 

🍾 Results: The property is currently valued at $600,000. The team was able to raise the total monthly rent of $3,720 to $5,950. 

Ian and the team will hold the property until rates fall below 5.5%, and then 1031 exchange into a larger property.

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

_{🌎 BEST EVER CONFERENCE 2024}
WHERE PARTNERSHIPS & DEALS ARE MADE

The Best Ever Conference is where partnerships are formed, deals are made, and lives are changed.

Most people sign up for BEC looking to gain insights and strategies from diverse CRE minds.

To shake hands and party with like-minded, high-caliber investors, or people they look up to like Joe Fairless, Leka Devatha, or Kyle Matthews. And maybe even find a new deal.

But most often they walk away with something much more important.

It’s momentum. And confidence. But it’s also the MEANS — the network and roadmap — to turn their ideas into action.

“The conference helped me clarify my vision and passion… Since the conference, I have signed up for a supportive mastermind group (met founders at BEC), shifted my family's investment strategy from stocks to syndications, and am thrilled to announce that I have founded a private equity firm.” —Lili Tseng, first-time attendee

Don’t let another year pass you by. Catapult your investing today.

👉 Register by March 22 with coupon code BESTEVER24 to save 25%.

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—Joe Fairless