💰 This program brought in billions. Will Trump extend it?

👋 Hello, Best Ever readers! Due to technical difficulties, we missed Thursday’s newsletter. But fear not — we’re back with a special makeup Sunday edition.

In this week’s newsletter, Opportunity Zone advocates wait on Trump, multifamily starts spike, and self-storage lending keeps evolving.

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Let’s CRE!

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CRE HEADLINES

📈 Multifamily Starts Spike: U.S. housing starts increased by nearly 16% month-over-month in December to an annual rate of 1.5 million homes, while multifamily projects with five units or more saw a 59% increase with more than 418,000 new units breaking ground — the most starts of any month in 2024.

👨‍⚖️ FTC Sues Greystar: The FTC and Colorado are suing Greystar, which manages 800,000 rental units nationwide, for allegedly defrauding renters through hidden fees and deceptive advertising practices, claiming the company swindled tenants out of hundreds of millions of dollars.

💧 Liquidity Rebound: CRE liquidity rebounded strongly in 2024, with private-label CMBS issuance surging 165% to $104.05 billion. Most new loans were single-borrower and floating-rate, suggesting market expectations of falling interest rates. 

💼 Coworking Comeback: With 90% of companies still reporting some form of hybrid work policy, the average office lease size has shrunk 27% compared to pre-pandemic levels, helping drive coworking inquiries to 15% of all office space searches nationally — up from 6% two years ago.

💪 Storage Stays Strong: While self-storage demand has dropped 10% due to a 30-year low in moving activity, the sector maintains 90%+ occupancy as shrinking home sizes, increased renter preference, and expected recovery in home sales drive a long-term positive outlook.

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WILL TRUMP EXTEND THE OPPORTUNITY ZONE PROGRAM?

The Opportunity Zone program, a tax incentive for investing in distressed communities established under Trump's 2017 tax law, has generated billions in investment. Now, it appears to be slowing as it approaches its 2026 sunset date. 

• Opportunity Zone fundraising reached $39.5 billion by late 2024, but growth has slowed significantly. It took over two years to add the last $9.5 billion, compared to a $10 billion increase in just nine months during 2021-2022.

• Q2 2024 saw a sharp 70% year-over-year decline to $446 million (from $1.3 billion), though Q3 rebounded to $1.24 billion following strong stock market performance generating new capital gains for investors to deploy.

• Overall, investment has slowed partly due to the 2026 deadline. New investors face immediate gain recognition rather than the seven-year deferral enjoyed by early participants in 2019, making the program less attractive.

Now, Trump's recent election has sparked renewed optimism in the real estate community about the program's potential extension, with investors preparing for its likely renewal. Multiple proponents of the program said it should be easier to sell to lawmakers this time around now that they can see it has succeeded in spurring billions of dollars into historically disadvantaged areas.

• All in Favor: Some supporters suggest the Opportunity Zone program should be made a permanent part of the tax code while implementing key reforms such as stricter qualification criteria for underserved areas, increased rural investment focus, formal impact reporting requirements, and expansion beyond capital gains to diversify funding sources.

• All Opposed: Critics argue the Opportunity Zone program isn't effectively driving new investment into distressed communities, noting that most projects would have happened anyway, funds flow to already-appreciating markets, and deals are primarily underwritten without considering the tax benefits. They suggest the program's structure needs a complete overhaul.

WHAT IT ALL MEANS

While Trump hasn't explicitly promised to extend the Opportunity Zone program, his campaign rhetoric and appointment of Opportunity Zone veterans to key positions have made advocates optimistic about its future. With Republicans controlling both Congress and the White House, industry experts anticipate the program will be extended — either short-term, for another decade, or permanently — likely as part of a broader tax package.

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THREE UPCOMING DEADLINES

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*Discount does not apply to already purchased tickets or the GA Accredited Limited Partner ticket.

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THE CHANGING FACE OF SELF-STORAGE LENDING

The self-storage lending market has undergone significant transformation since 2020, shifting from being dominated by banks to a more diverse mix of financing options. 

• Bank lending has decreased from two-thirds of the market in 2020 to less than half by 2024.

• Debt funds have increased their market share from 8.8% to 17.6% in the same span, while private lending rose from 3.1% to 13.7%, reflecting broader changes in the lending landscape and borrower preferences.

• The type of financing has also shifted dramatically. While permanent financing dominated through 2023 (reaching 80% of the market), it dropped to less than half by 2024. Meanwhile, construction financing has grown to over 40% of the market.

With $4.1 billion in self-storage loans maturing this year and banks continuing to retreat from the market, alternative lenders are stepping in to fill the gap. Insurance companies, debt funds, and CMBS lenders are actively deploying debt, creating a more competitive lending environment. 

While lender scrutiny remains tight, borrowers now have multiple options for financing acquisitions, refinancing portfolios, or securing construction loans. This diversification of lending sources could provide more flexibility in terms and potentially better rates for well-positioned borrowers, though they may need to look beyond traditional banking relationships to secure optimal financing.

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THREE YEARS, $800,000+ PROFIT SPLIT BETWEEN 3 PARTNERS

Christal Smith deBoer and team realized an $800,000+ profit on this 42-unit multifamily property in just three years of ownership.

Here's how they did it 👇

🏢 Property Details: This 42-unit multifamily property was purchased in December 2020 and is located in Logansport, Indiana.

💸 Finances: The property was purchased for $2 million. The team secured a $1.6 million loan at 4.75% interest with $400,000 seller financed and $100,000 of repair credit. Two partners were brought into the deal in addition to Christal as loan sponsors for net worth and experience, so no additional capital was needed.

💼 Business Plan: Over the three years of ownership, seven units needed complete renovations, costing $5,000–$6,000 per unit. Other units received minor upgrades as they became available, which included new flooring, cabinetry, bathrooms, and more. The team cleaned up the landscaping and curb appeal of the property and replaced four metal roofs in the complex, ranging from $23,000 to $28,000 each.

🍾 Results: The property sold in November 2023 for $2,812,670. The profit of $810,572.87 was split between Christal and her two partners in a 70/15/15 configuration.

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

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