🤝 CRE's unlikely new deal-making forum

👋 Hello, Best Ever Community!

In this week’s newsletter, CRE brokers take to TikTok, Vyzer tackles investment tracking, and one investor reveals their plan to boost a multifamily property’s value by $10 million.

This week’s newsletter is brought to you by Ascent Equity, a real estate investment firm that helps accredited investors build wealth through strategic, passive investments in multifamily properties. Learn more about Ascent Equity here.

Off we go!

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CRE HEADLINES

🏀 NBA Superstar’s CRE Buy: Golden State Warriors star Stephen Curry purchased an office building in San Francisco's Dogpatch neighborhood for $8.5M, to which he plans to relocate his business enterprise to contribute to the area's revitalization.

🌥️ Sun Belt Slump: While U.S. asking rents increased by 1.1% year-over-year in April, Sun Belt markets are seeing some of the biggest rent declines in the country.

💸 BoA Buys $2.9B Portfolio: Washington Federal Bank is selling a $3.2 billion multifamily loan portfolio to Bank of America for $2.9 billion amid concerns about regional banks' exposure to troubled CRE loans.

📈 Multifamily Distress Doubles: The distress rate for multifamily properties nearly doubled in April, reaching 7.2%, as rising interest rates and falling property values make refinancing increasingly difficult for owners and developers.

💰 Starwood’s Cash Crisis: Starwood Capital Group's $10 billion real estate fund, Sreit, is facing a liquidity crisis due to high investor redemption requests and limited options to raise cash, potentially leading to a complete halt in redemptions.

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CRE’S UNLIKELY NEW DEAL-MAKING FORUM

Deal flow has brought many CRE brokers and investors’ businesses to a halt over the last 18 months. But while some bide time, awaiting interest rate cuts that will allow more deals to pencil, others are proactively stimulating transaction volume by using an unlikely channel: TikTok.

📱 Where Deals Get Done: In 2020, Denver-based broker Aviva Sonenreich tried something new and began posting videos showcasing commercial properties, their specifications, and local market insights on TikTok under the #commecialrealestate tag. Today, she has sold a $2.6 million building and a three-property mixed-use complex from TikTok-generated leads, while Phoenix-based broker Eddie Gonzalez credits the platform for facilitating nearly 200 transactions. Several other brokers have seen similar success.

🤔 Why TikTok? TikTok has 1.5 billion monthly active users and boasts the highest user engagement rate among social media platforms, with an average of 2.65% by follower count. Additionally, 71% of users are likely to purchase products they see on their feed. Its hyperlocal focus and visual nature make it an ideal platform for CRE players to showcase properties, creating a forum to network and secure clients — or, if you’re an investor, find deals.

🚸 But TikTok’s for Kids, Right? Not quite. While 46% of TikTok users are Generation Z, the #commercialrealestate tag on TikTok attracts an older demographic, with creators reporting an audience skewing toward users in their 50s and 60s. Still, that younger demo features future buyers and colleagues. So, in a world where marketing has become increasingly targeted, TikTok is a place to cast a wide net and get more mileage out of a single piece of content.

WHAT IT ALL MEANS

Content is king. And in a CRE industry that's notoriously slow to adapt and adopt new technology, those using this period of low deal volume to build relationships, create unique and engaging content, explore new platforms, and innovate to reach new audiences are the ones who will not only survive and thrive in the short term but will also be ahead of the game when deal volume inevitably picks up. 

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TRUMP VS. THE FED: WHO YA GOT?

Last week, we asked if you think the Fed has too much power. Here’s what you had to say:

_{💻 ASCENT EQUITY GROUP}
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Sunrise in Chandler is nearing its capital raising goal and will be closing soon! This opportunity is open to accredited investors only.

➡️ Discover more about Ascent Equity here.

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FROM VYZER

Tracking investments from limited partners in private equity or other alternative investment mediums requires a proactive approach to ensure transparency and alignment of interests with the fund managers. Here are some strategies for effectively tracking LP investments:

📆 Regular Performance Reviews: Establish a schedule for performance evaluation, such as quarterly or semi-annually, to review the fund's performance against benchmarks. Analyze the fund's performance in terms of absolute returns and relative performance compared to benchmarks.

🧐 Understanding and Analyzing Reports: Familiarize yourself with the critical components of fund reports, including distributions, capital calls, and net asset value (NAV). 

📱 Engaging With Fund Managers: Maintain open lines of communication with fund managers to gain insights beyond periodic reports. Schedule regular meetings or calls to discuss performance, strategy, and any concerns.

🔍 Due Diligence on Fund Managers: Conduct thorough due diligence before committing capital to a fund, including evaluating the fund manager's track record, investment strategy, and alignment of interests with LPs.

👉 Discover more details and tips for tracking LP investments here.

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$10M MULTIFAMILY VALUE BOOST STRATEGY

Charles Seaman is working towards a $10 million increase in value over five years on this 236-unit multifamily property. Here's how he's doing it. 👇

🏢 Property Details: The Class C property, purchased in June 2023 in Decatur, GA, had an occupancy rate of 93.2% at the time of acquisition. 

💸 Finances: The purchase price was $32,300,000 with $8,575,000 in capital raised. The debt structure for the property involves a loan assumption of a Fannie Mae loan. The loan has a balance of $25,500,000 and carries an interest rate of 3.48%.

💼 Business Plan: The previous owner invested $3.3 million in upgrading 229 out of the 236 units. The current priority is to focus on reducing expenses while simultaneously increasing tenant retention, rents, and net operating income (NOI). To improve operations, a third-party management company has been brought in. The plan is to hold the property for five years before selling it.

🍾 Results: The projected valuation of the property after five years is $42,501,133. Investors can expect an average return of 9.24% over the holding period, with returns varying based on the investment class and amount. The specific returns for each class are as follows: 17.36%, 7%, 8%, and 10%, with the class determined by the investment amount.

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

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FREE DOCUMENT DOWNLOAD

How to Underwrite a Highly Distressed Apartment Deal

Generally speaking, underwriting apartment deals is fairly straightforward (but time-consuming). However, as value-add investors, sometimes we come across distressed deals that require more than simply plugging numbers into an Excel spreadsheet.

How do you underwrite a deal that isn’t stabilized (occupancy less than 90%)? What if the property requires one year to address deferred maintenance? How do you take tax liens into account?

When underwriting a distressed property, you’ll calculate your maximum purchase using the following formula.

👉 Download now!

🙏 Thanks for reading!

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Have a Best Ever day!

—Joe Fairless