From the Desk of CF Capital: December Investor Report
Hello Friends and Investors,
Excitement is in the air as the holiday season is upon us! As we navigate the ever evolving seas of the real estate market, we're grounded by the opportunity to take time with family and friends during this special time of year. There's so much to be thankful for. Simultaneously, we remain very active in optimizing our current portfolio during this volatile market and seeking new acquisitions during this window of opportunity to acquire high quality assets at a discount, while Santa gets his sleigh all loaded up. Let's dive into some updates and some of what's going on in our world.
November: A Transformational Month - Personally and Professionally
Members of our team had an incredibly productive and transformative November. Bryan and his wife Channing traveled to Peru during the week of Thanksgiving to hike the Inca Trail to Machu Picchu. For 4 days and 3 nights, they challenged themselves mentally and physically to explore one of the most remarkable places in the world, and the metaphoric transformation they experienced was infectious.
Tyler traveled to South Beach Miami to attend Bisnow's Ascent Retreat, which is the most exclusive commercial real estate community across the country, comprised of the top owners, developers, and investors under the age of 45(ish). With $4 trillion+ in AUM, 2.1 billion in square footage under ownership, & 600K+ in multifamily units owned, the Ascent community powers the entire CRE industry. This was a great event with some of the most respected CRE participants (institutional equity investors, lenders, debt and equity brokers, sponsors, developers, etc) across the nation (and included excursions with some of the most renowned experts on high performance) for Tyler represent CF Capital and to connect to new and existing strategic partners, discuss and identify collaboration opportunities in a casual environment. While the waters of the economic sea remain choppy, relationships forged and innovation identified through this type of event is to the benefit of our existing and future partners with folks like yourself.
Also, CF Capital was the “Featured Developer” at the 2023 KY CPA Commercial Real Estate Conference, where we discussed strategies, structures, tax strategies and case studies with leading CPAs across the state.
Separation Season
For many in the real estate industry, this time of year brings a slowdown in activity, yet for CF Capital we see it as "separation season," even without giving up the fun of the holidays. Separation from the previous version of each of our team members in a sense of personal growth (we believe that our collective success is a lagging indicator of our continued individual personal growth, after all) and separation from the competitive landscape in the sense of business development. Many others are taking their foot off the gas in many ways and taking extended time off during this time of the year, yet, for us, we're doubling down on finishing the year strong and setting up 2024 to be our best year yet. Of course we're still taking time to observe the holiday season with our loved ones, but instead of taking the entire season off, we're challenging ourselves to step up our commitments during this time of year.
How are we doing so? For starters, later this week we are conducting our annual offsite retreat for our leadership team. During this multiple day out of town retreat, we reflect on the success and opportunities for growth that we've encountered this year, refresh and discuss our SWOT analysis, go deep on what's working and not, and set goals in accordance with our Vivid Vision for the next year, and more. Since our inception, we remain committed to the Traction EOS comprehensive business management framework, and we're looking forward to "emptying the tank" of our minds to help create clarity, efficiency, inspiration and set the path for optimal execution in the next year. We certainly mix in a little fun and team bonding experiences, but this type of thinking is some of the hardest work we do, and inevitably it helps us really hit the ground running for the new year.
How else are we embracing this separation season? Another example is the doubling down on the growth of our team, even during this time of year (and during the phase of the market cycle, where many groups have implemented hiring freezes and are even downsizing). In addition to our normal course of daily business, we're actively recruiting two positions: Sr. Real Estate Analyst, and now Regional Property Manager. If you know someone who should be considered for either of these positions, please send us a resume with a cover letter to careers@cfcapllc.com.
Real Estate Market Analysis & Outlook
The elephant in the room remains interest rates. Recently, we've seen treasuries decline significantly from mid October to the early part of December. Will this trend hold? Does this tell us that the bond market is projecting a "hard landing" in 2024 after all? How will the Fed respond to a recession during an election year? In the words of Nate Bargatze, nobody knows. (By the way, if you missed that skit on SNL, it’s definitely worth 5 minutes!)
Beyond interest rates, many multifamily markets across the sunbelt and western US continue to see very meaningful rent declines, and growing vacancy with record new deliveries. The midwest and northeast have been more stable (while our markets in the midwest have been as steady and attractive as can be, especially during this time, further cementing the relevance of our investment thesis for these markets where we tend to be more insulated from booms and busts), with less prior significant expansion during the boom period of late 2020 to mid 2022 (the key word is "less" here, as historic liquidity and artificially low interest rates made some investors make some strange decisions in all markets). Investors who aggressively pursued assets at all time low cap-rates during 2021 who have maturing debt in this environment are looking at carnage in the face as they approach capital events, leading to some opportunistic scenarios.
These factors, and continued inflation, eating into profit margin for operators all over the country, will heavily influence the condition of the market into this new year. Well capitalized operators and investors will likely be the beneficiaries of some very attractive opportunities as a result. Stay tuned, and stay ready.
In conclusion, we'd like to wish you and yours a fantastic and memorable holiday season. We challenge you to join our separation season challenge, and at the same time, enjoy the magic of this wonderful time of the year. As always, don't hesitate to reach out to us if you'd like to discuss the market, your goals, and any other questions you might have for us. We're here to help you, and in partnership, we can and will go far together.
Season's Greetings,
PS. There's no higher compliment than you referring us to your friends, family, and colleagues. We'd be honored by the opportunity to become a part of their trusted networks. Share your experience investing with CF Capital & invite others to become an investor here.