It seems that most in the industry are now less optimistic about the Fed reducing interest rates in a meaningful way in 2024.  The market often overreacts to news, and the optimism that was felt late last year about a Fed-pivot is reverting back to some level of uncertainty. We are also in an election year, and many believe that the Fed attempts to be less active in an election year. This suggests that we may only start to see rate reductions later in the year, and perhaps only one or two small rate cuts at best. While this would be welcome news for many real estate investors, it will har ..read more

Many of us are searching for good investment opportunities in commercial real estate. While I believe the first quarter of 2024 will be relatively slow, investment opportunities should improve in Q2, driven by debt maturities and improving sentiment in capital markets.  That means that now is a good time for passive investors to get back to basics and review the fundamentals of what distinguishes a good investment opportunity from one that may present more risk than return.  The biggest challenge facing passive investors in 2024, is developing the courage to step back into the market ..read more

Like many investors, I am looking towards 2024 and hoping for a better year with better opportunities. 2023 has brought a lot of stress to commercial real estate, with the historic rise of interest rates showing just how fragile our highly leveraged financial system is.  During the past year, we have seen how closely correlated real estate values are to interest rates, and we have seen a large number of capital calls, as sponsors try to save deals. Unfortunately, we have witnessed many of these attempts fail, with some properties foreclosed on, and a lot of investor capital lost.  As ..read more

The looming debt maturities that we will see in the next few quarters will be a reckoning for many investments made in the post-covid boom. While many investments made during this period are providing investors with sizable returns, others are under tremendous stress as higher debt costs drive up cap rates. We have seen many commentators start to be more bullish about interest rates beginning to fall in early 2024. While this would provide relief for many apartment owners, it may be premature. Inflation is still above the Fed’s target of 2% (their preferred measure of CPE Inflation is currentl ..read more

2023 has been a difficult year to find new real estate investments, and the market is struggling to reach price discovery amongst rapidly changing market conditions.  Many investors remain on the sidelines, waiting until prices reduce further so that yields start to make more sense in the context of the rising risk-free rate. However, trying to time the real estate market can be a fraught strategy given the illiquidity and slow-moving transactions inherit in real estate. I do think that now is the time to look very closely at market conditions and asset values and do some critical thinkin ..read more

Last week the Fed communicated that they expect rates to remain “higher for longer”. While many in the market were expecting (read: hoping) that rates would reduce sooner rather than later, this puts a dampener on the outlook for many businesses and investors who currently rely on variable rate debt. We have already started to see some stress in the multifamily sector, where some investors are on short term variable rate debt with significantly increased debt service costs and looming expiration dates on their bridge loans. Investors in these deals fall into a few buckets: They will successfu ..read more

With the large number of catastrophic loss events in recent years we have seen insurance companies leaving markets like Florida, and California, and the resulting higher cost of property insurance has become a big drain on NOI and property values for commercial real estate.  Given that property insurance premiums are increasing by as much as 300% in some markets, investors are struggling to determine whether the high cost of insurance is temporarily (and therefore creates a buying opportunity), or whether this is a systemic repricing of risk which will reset property values going forward ..read more

As we witness the gradual unwinding of the rapid growth experienced during the post-pandemic era, it has become evident that property values are struggling to keep up with the Federal Reserve’s swift pace of interest rate hikes. Acquiring suitable investment properties has proven to be quite challenging over the last few months. In response to these new market conditions, Equity Yield Group launched a preferred equity fund approximately eight months ago. Our investment thesis was simple, yet prudent: with prices not adjusting enough to justify new acquisitions, and the investment opportunities ..read more

We have always considered asset management to be the most important element of our investment strategy. Sure, it’s important to be able to buy right, find good deals and not overpay. It’s also really important to finance right and seek the most efficient debt for any given strategy. But great asset management can be the difference between comfortably outperforming on an asset and struggling to meet investor expectations.  And yes, sometimes asset management can also be the difference between limping to the finish line and not being able to finish the race at all. Operations, op ..read more

“it’s only when the tide goes out that you discover who’s been swimming naked” – Warren Buffet. Warren Buffet is one of the most prolific investors of our time, but what makes him such a successful investor? One could argue that it’s his career, made up of sound investment decisions over many, many years. However, what is it that determines a sound investment?  The most obvious approach may be to look backwards and see whether or not the investment performed. The problem with this though, is that not all performance is the result of business performance or asset fundamentals.  S ..read more