From the Desk of CF Capital: February Investor Report

Hello Friends and Investors,

We hope you are doing well and having a great month so far. It's always great to get a chance to sit down and write this newsletter and share with you what we've been up to, what's on our mind, how we're viewing the market, what data and perspectives we're synthesizing, how we're making sense of key business decisions surrounding existing operations and potential acquisitions, and simply sharing with you company and personal updates from members of our team at CF Capital. We look forward to doing so once again today, and investing further into our long-term relationships together with you. Allow us to strive to strike the balance between covering all these bases without making this too much of a novel, a challenge indeed!

Ultimately, the real estate investment business can be either very complicated or very simple depending on the lens you look at it with. If we were to attempt to simplify, as we always say success always hinges on high quality relationships, nuanced and nimble intelligence (ie. distilling information and experience into wisdom), and effective action. To chunk it down even further, in multifamily real estate, it's all about providing a quality place to live at a fair market price, offering high quality service on maintenance or other requests, and operating the business by prudently managing to a realistic budget. This all assumes you made conservative assumptions prior to the investment and the return on investment is competitive and helps you reach your objectives, of course.

On the "nuanced and nimble intelligence piece," we continue to be operating within a complex and constantly changing broader climate currently heavily influenced by capital markets volatility, persistent yet recent reduction in quarter over quarter inflation (perhaps a degree of current disinflation, also depending on how you forecast), a unique labor market that appears to be healthy on the surface and complicated beneath the surface, an election year of momentous impact, and black swans (ie. unknowable impactful events) always swimming at some part of the horizon. While the broader US economy is not technically in a recession, most in real estate would agree that we've been operating within a downturn for more than the last year with significant reductions in transaction activity across the country, downward pressure on occupancy rates from record new construction deliveries (along with some markets outside of our targets in boom/bust territory experiencing significant downward pressure on rental rates), and operating costs materially rising. Market participants are challenged to find a "light at the end of the tunnel." Yet, all the while, and perhaps due to these conditions, significant opportunities are absolutely abound. In many respects, we believe we are in a window of opportunity for generational investment opportunities in multifamily real estate. With our relationships, expertise, we are positioned to capture these opportunities and will continue to keep you informed as deals develop.

In December the Fed Chairman Jerome Powell indicated the likelihood of 3 rate cuts in 2024 to begin as early as March, a surprising dovish stand from otherwise a very hawkish Fed as of recent quarters, and in early February the same Jerome Powell indicated that in light of recent economic data they would be treading lightly on any rate cuts. Bond markets reacted and impending interest rates responded in opposite directions to each set of commentary, and no one can truly predict where markets will lead as the year progresses. Forward looking curves could be as valuable as the paper they are written on for all we currently know. Further sauce to add to the saucepan of making sense of a market with conflicting indicators across the board. The result? Continued confusion and a continuation of somewhat of a stalled market. Yet, as this year unfolds, we are anticipating transaction activity picking up due to necessity for a myriad of reasons whether debt maturity or operational challenges related.

So now that you're either bored to tears by all of this analysis or confused with all of the conflicting considerations, let's ask the question that you've been waiting for! What else have the men and women of CF Capital been up to and what else is on our mind?

We are thrilled to announce that we just hired a new Regional Property Manager with over 20 years experience to oversee our portfolio exclusively. We couldn't be more pleased with this successful recruitment and cornerstone hire for our organization as we persistently deliver upon our promises to our partners on all active deals, into the future. More details to come as we introduce this team member to you in the coming months.

We're nearing the hire of a Sr. Real Estate Analyst who will be joining our team in the coming month. We're very excited to level up our nuanced intelligence and capacity for effective action on the fronts of intelligence, asset management and investor relations.

We had a great trip to San Diego for the annual NMHC conference to meet with the top brokers, operators and investors across our region and the country. The future certainly is bright with some of the brightest minds in our field!

We're keeping close tabs on the HR 2074 Bill that was recently passed in the House of Representatives, which includes provisions for the reinstatement of the 100% bonus depreciation of real estate investments, retroactive to 2023. This bill has been moved on to the Senate with tremendous bipartisan support.

As always, please reach out to us and let's discuss your thoughts, concerns, objectives or to catch up in general. We appreciate your partnership and look forward to continuing to earn your trust as time marches on.

In Partnership,

Tyler & Bryan

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.