Wall Street heavyweights raising BILLIONS for this opportunity.

Read Time ~ 4 Minutes.

Overall Real Estate Market

Wall Street heavyweights raising billions for distressed assets link

• Distressed Market Surge: Commercial-property values have fallen 10 to 15 percentage points since last year, with potential to fall 20 to 25 percentage points. The volume of distressed commercial real estate grew by $8 billion in Q2, the biggest quarterly increase since Q2 2020.

• Significant Sales: The owner of a San Francisco office tower sold the property for $41 million, a steep decline from its $107 million purchase price in 2014. This marks a new phase in the commercial real-estate upheaval, with more owners unloading distressed properties.

• Investor Appetite: Many new funds are targeting individual investors, who have shown a strong interest in property investments. Nontraded real-estate investment trusts raised about $100 billion in the past seven years, but over $9 billion was redeemed in the first six months of this year.

MetLife Expands Single-Family Rental Investments With New Fund link

• MetLife Investment Management closes its Single Family Rental Fund with a whopping $390 million in capital commitments.

• The investment strategy is laser-focused on developing and acquiring purpose-built, single-family rentals across the 75 largest U.S. markets.

• This move signifies a deepening investment into the single-family-rental market, reflecting a strategic alignment with the current real estate trends.

Why Mortgage Rates Are Still So High Despite All the Good News on Inflation link

• Mortgage rates remain above 7% due to high 10-year treasury yield, hitting daily average rates of 7.26%, the highest since October.

• Two economic factors are counteracting the impact of encouraging inflation news: concerns over U.S. government debt and long-term expectations about the real neutral rate of interest (r-star).

• There's a possibility that mortgage rates could decline even if the 10-year treasury remains high, as the difference between them has been larger than usual in the last year.

How far is each market past peak apartment construction? link

• Construction Tapering Off: As of the end of 2nd quarter 2023, market-rate multifamily apartment units under construction are down to 1,037,904 from 1,083,966 in the prior quarter. A subtle sign that things are beginning to taper off.

• Regional Differences: Six of the nation's 50 largest apartment markets are at peak construction, with only one in the South region. West region markets show the largest departure from peak levels, with San Francisco down 92% from its peak.

• Local Impact: Just 150 of the nation's 1,039 submarkets are at peak construction, less than 15%. This indicates that many submarkets could rebound from the supply-driven performance slowdown, while others may face supply pressure well into 2024-2026.

Opportunities

I have talked about the opportunity in Cold Storage before. Here is another signal boost.

Envision Enters Cold Storage Sector With $1.5B in Purchasing Power link

• Envision Cold, a new player in the cold storage sector, has entered with a whopping $1.5 billion for buying and development.

• The company has already acquired assets in Oakland, San Francisco, Laredo, Texas, and Vancouver, BC.

• Newmark, who advised on the capital raise, secured $500 million for the company's capitalization. Simple, yet a significant move in the cold storage industry.

Risks

California's Hotel Deal Volume Falls Even Further Than in the Great Recession link

• Steep Decline: The number of individual hotel sales in California dropped by nearly 53% year over year in the first half of 2023, a steeper decline than in 2009 during the Great Recession. The average sales price grew 33.6%, but the median price fell by 9.4% to $6.88 million.

• Interest Rates Impact: The drop in volume is attributed to interest rates, not distressed markets or declining hotel performance. With interest rates between 7.5% to 8%, buyers are looking for a 9% to 9.5% cap rate, causing a standoff between buyers and sellers.

• Distressed Hotels and Alternative Uses: Well-known distressed hotels in California are considering alternative uses, such as conversion to residential spaces. There could also be opportunistic buyers who want to keep these properties as hotels, buying them at a fraction of replacement cost, but such buyers are few.

Something I found Interesting

The Most Pet-Friendly Cities for Renters in 2021 link

• Tucson, AZ Tops the List: With 92% of listings allowing pets, Tucson, Arizona, leads as the most pet-friendly city for renters.

• New York Struggles: Only 10% of listings in New York City allow pets, making it one of the least pet-friendly cities.

• West Coast Trend: Cities like Portland and Seattle show a strong pet-friendly trend with 89% and 78% of listings allowing pets, respectively.