👔 Where young professionals are moving and why

👋 Hello, Best Ever Community!

In this week’s newsletter, young professionals relocate, Argentina scraps rent controls, Kmart shuts down, and CRE comes back to life.

Today’s edition is brought to you by the Best Ever Conference. This year, for the first time EVER, we are offering a NEW ticket exclusively for accredited limited partners for a 25% discount compared to regular general admission.

👉 Register here to lock in this special rate.

Let’s go!

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CRE HEADLINES

👨‍🔬 Rent Experiment: Argentina has scrapped its rent control laws, which were among the strictest in the world. Supply is up over 170% in some areas while rents are stabilizing. It’s too early to celebrate, but the experiment could influence how the U.S. handles future rent controls.

📣 Attention Kmart Shoppers: Kmart, the retail chain that once boasted more than 2,000 stores, is closing its last full-scale U.S. store in Bridgehampton, NY, on October 20. Only a small Miami location and a few stores in U.S. territories will remain.

☣️ Toxic Industrial: Industrial developers are turning to contaminated sites, including areas with toxic waste, to find sites for warehouses and other industrial projects in a market that is increasingly constrained by land scarcity and community resistance.

🏢 Back to Work: Despite office usage remaining at about 60.5% of pre-pandemic levels in major metros, 83% of global CEOs surveyed by KPMG said they expect a return to full-time office work within three years. This marks a significant increase from 64% who held this view in 2023.

👵🏻 Seniors vs. Supply: The aging population's rapid growth is outpacing senior living development, indicating a significant unit shortfall by 2030. This creates a supply-demand imbalance, as demand growth is expected to exceed supply growth in the coming years.

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WHERE YOUNG PROFESSIONALS ARE MOVING AND WHY

Young professionals are on the move in America, and smaller metros that offer a balance of affordability, livability, and career opportunities are the main draw.

Between July 2020 and July 2024, several metro areas experienced significant net domestic migration growth.

• The Leaders: Austin-Round Rock-Georgetown, TX led with 3.6%, followed by Fayetteville-Springdale-Rogers, AR (3.3%) and Raleigh-Cary, NC (2.6%). 

• Other notable areas included Des Moines-West Des Moines, IA (1.4%), Oklahoma City, OK (1.1%), and Madison, WI (0.6%). 

These regions, many of which rank highly in livability reports, have maintained positive net migration into 2024. And while these metros span various regions, they all attract residents coming from core-based statistical areas (CBSAs) with, on average, younger and less affluent populations. 

• Exhibit A: The median household income in Raleigh is $84,000. On average, those relocating to Raleigh came from CBSAs with a significantly lower weighted median HHI ($66,900). 

• Exhibit B: Those moving to Austin, where the median HHI is $85,400, came from regions with a median HHI of $69,900. 

Of the Top 6 metros in net migration listed, the average age of incoming residents was lower than that of existing residents in all but Raleigh, which was the same. This reinforces these metros’ appeal as destinations for those still establishing and growing their careers. Des Moines and Oklahoma City saw the largest gaps between the median age of newcomers vs. the existing population.

WHAT IT ALL MEANS

Each of the Top 6 metros in net migration had better grades in jobs and housing than the regions people migrated from. While it’s no secret that people generally want good jobs and high-quality housing, these cities offer both, providing young professionals with the opportunities to enhance both their careers and financial prospects. And with Austin and Raleigh both landing in the Top 12 best overall cities for renters in 2024, they’ll likely continue leading the way.

_{🎟️ BEST EVER CONFERENCE}
CALLING ALL ACCREDITED LIMITED PARTNERS

For the first time EVER, we are offering a NEW Best Ever Conference ticket exclusively to accredited limited partners for a 25% discount compared to regular general admission.

For $995 (normal general admission is $1,295), you get access to:

• Main stage keynote speakers and breakout sessions

• GP-LP Speed Networking

• Lunch on March 4 and 5

• The Best Ever Party

• 6 brand new add-on workshops

• Over 70 vendors and sponsors in the Best Ever marketplace

• … and much more!

Click below to register, and lock in this special rate👇

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IS CRE COMING BACK TO LIFE?

With prices down 19% from their 2022 peak, the CRE market is showing signs of life, as prices have ticked up 3% in 2024. Key factors include:

• Lenders and property owners seeking to cut losses and explore new investment opportunities as the Fed’s rate cut is bringing some clarity to property valuations, encouraging market activity.

• Sellers offloading properties at significant discounts in recent months. A notable example is a New York City office building that sold for 67% less than its 2018 purchase price. Similarly, the former Chicago headquarters of Cboe Global Markets Inc. changed hands for about half its pre-pandemic value.

Transactions were down 5% in July from a year earlier to $203.8 billion, according to MSCI Inc. But lately, transaction volumes are showing "steady" improvements, suggesting a potential market bottom.

There’s still lingering uncertainty, which has some investors cautious about jumping in too early. But with further interest rates reportedly on the way, 2025 looks like it could be the rebound year.

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WHEN A PROPERTY IS SO GOOD YOU BUY IT FROM YOURSELF AND RECAPITALIZE

Andrew Reichert and the team at Birgo Capital had such good returns with this deal that they are buying it from themselves and recapitalizing. Here's how they’re doing it 👇

🏢 Property Details: This property was purchased in 2019 and consisted of 174 Class-B multifamily units spread across 11 buildings. It is located in Morgantown, WV, about 1.5 hours south of Pittsburgh.

💸 Finances: The property was purchased for $11,470,000, and the team raised $3,095,589 in capital. They were able to secure a loan for $9,176,000 with a 4.22% interest rate and three years of interest only payments.

💼 Business Plan: They instituted their in-house management team that drastically improved tenant relations and retention. The team fully renovated 38 units and did minimal turns on a few others. They also did extensive exterior CapEx improvements such as fixing wooden decks throughout the units.

In the end, the team and investors liked this property so much that they decided to buy it from themselves and recapitalize. About 85% of the initial investors are staying on board, and they will be closing on the property at the end of this month. The ones who decided to exit will be realizing the returns below. Birgo’s third investment fund (Birgo Income Fund III) is acquiring this asset from its second fund (Birgo Income Fund II).

🍾 Results: They are selling the property for $19,400,000. The investors that chose to exit will realize an IRR of 31.3%, preferred returns of 8%, and a 3.1x equity multiple.

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

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FREE DOCUMENT DOWNLOAD

How to Compensate the Loan Guarantor

If you’re just starting out, you likely don’t have the liquidity, experience, or net worth to be a loan guarantor, which means you’ll need to find a high-net-worth someone to fill that gap in order to secure a loan. This document provides ideas and strategies for convincing and compensating a loan guarantor to jump on board.