April 2023 Requity Report
APRIL?2023
ISSUE 4
Welcome to the fourth edition of the?Requity Report.?In April, we launched an exciting new investment opportunity to partner with The Requity Group (TRG) on originating first-position loans to professional real estate operators on a deal-by-deal basis.?To date, TRG has solely focused on equity investments in cash-flowing housing and outdoor hospitality assets with long-term growth potential and tax advantages.?However, given the state of the market, we have seen less meaningful deal flow and have had numerous interactions with investors seeking new investment options.?This opportunity provides our investors with a secure short-term position that can generate attractive risk-adjusted returns while fulfilling our mission to create, improve, and preserve affordable workforce housing.?If you would like to learn more about this opportunity, please?click here?and fill out our form, as we intend to offer these opportunities through a?separate email list?moving forward.?For those who already filled out the form, we will in touch in the coming days with additional information and next steps.?
The Requity Group attended the?MHI Congress and Expo 2023?in Las Vegas, Nevada.?MHI is the industry's premier event for manufactured housing professionals. This year's Congress & Expo featured top-quality educational programs led by dynamic speakers, networking receptions with the industry's most successful professionals (industry brokers, financial partners, operators, and vendors), and a sold-out exhibit floor with over 100 companies showcasing the latest innovations in manufactured housing products and technology. This year's event had over 1,600 attendees.?Our attendance allowed TRG to make new connections and strengthen existing relationships with strategic partners in the industry.
We hope you enjoy this month's newsletter,?and we look forward to continuing to provide you with updates on everything?Requity!
Seahaven RV Park in Sneads Ferry, NC, is a 68-site R.V.
campground.?Seahaven is a picturesque R.V. campground and marina located at the cove of the New River in North Carolina. It is located just 2.4 miles from the Intracoastal Waterway and 3.0 miles from the Atlantic Ocean, making it the ideal place to unwind and relax. Situated at the back gate of Camp Lejeune, the largest Marine installation in the U.S. and only minutes away from Topsail Island, this quiet campground is perfect for those seeking a peaceful retreat with water as its centerpiece.
Since we acquired this property in May 2022, we launched our short-term rental (after a complete interior and exterior remodel), built a new gravel parking area for the STR, completed the bathhouse remodel, added picnic tables to our short-term sites, added a new gate to the community garden area, and painted our office door / added deck decorations.??
Here is a recap of the work done at Seahaven RV Park:
We have also begun a blog on our website to help with our SEO objectives and to drive more traffic to the site.?Click here for a sneak peek.
To learn more about TRG Resorts and Seahaven RV Park, visit??www.trgresorts.com.
Catch up on our Requity Insights podcast
Dylan goes over the different types of R.V. properties and the various guest demographics.
Dylan breaks down the question many investors ask themselves, "What criteria should I consider when acquiring an R.V. community?"
Luis and Dylan discuss some of the key factors for sourcing R.V. Parks and R.V. Campgrounds
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Market Updates
Private Investors Buy More Commercial Real Estate Than Institutions For the First Time On Record
According to The Wealth Report 2023, published by Knight Frank, private investors purchased $455B worth of worldwide commercial real estate in 2022, representing 41% of the global investment total and surpassing institutional investors' share for the first time on record. The report also states that private wealth from the U.S. is expected to be the most active among investors this year as investors pivot towards commercial real estate to navigate the higher inflationary environment. Private buying activity fell by only 8% from the previous year, whereas institutional investment activity declined by 28% in 2022. Private buyers put money into asset classes such as retail properties and hotels, which saw increased investment activity. In contrast, apartment properties declined 13% from the previous year. This shift towards private investors reflects the impact of the Federal Reserve's interest rate hikes, which have changed the risk calculus for investing.
Overall, The Requity Group views the trend of private investors dominating the CRE investment market as an opportunity to continue raising more private capital and building relationships with high-net-worth-individuals (HNWI) as?institutions?have mostly kept their capital on the sidelines, and have been for the most part inactive in the market.?We also believe?this number?should continue to rise, as more-and-more HNWI are becoming exposed to the benefits of directly?investing in commercial real estate through sponsors such as ourselves.?
Click here?to read the full article!
Banking Troubles Continue: First Republic Bank Seized, Sold to JPMorgan in Second-Largest U.S. Bank Failure
First Republic Bank, the second-largest bank failure in US history, has been taken over by California regulators and sold to JPMorgan Chase. JPMorgan will assume all of First Republic's $92 billion in deposits and purchase most of its $233 billion in assets, further solidifying its position as the largest banking institution in the US. The bank's collapse was triggered by customers withdrawing $102 billion in deposits after Silicon Valley Bank's collapse in early March, with its problems rooted in a wrong-way bet on interest rates that dented the value of loans made when rates were near zero. The Federal Deposit Insurance Corp. will share losses with JPMorgan on First Republic's loans, with the agency estimating a loss of $13 billion in the deal, and JPMorgan will receive $50 billion in financing from the FDIC. This story marks three of the four largest US bank failures occurring in the last two months, and investors and customers are now concerned about banks that heavily depend on uninsured deposits and have significant unrealized losses in their loan and securities portfolios caused by increasing interest rates.
We believe that while the failure of First Republic Bank is significant, it is unlikely to trigger another crisis of confidence in the regional lenders that serve a large chunk of America's businesses and consumers. Regional lenders uniformly lost deposits during the first quarter, but the declines were modest compared with First Republic's $102 billion outflow. Furthermore, JPMorgan's acquisition of most of First Republic's operations, including all of its deposits, is expected to ensure that customers have full access to their deposits and prevent widespread panic in the market. However, the deal will make JPMorgan even bigger, which could have longer-term implications for the banking industry and competition in the market.
Click here?to read the full article!
Chart: Stock Market and Commercial Real Estate?
While commercial real estate's compound annual growth rate continues to outperform the stock market, it's often overlooked that these returns do not factor in the significant tax benefits associated with real estate investing. Many people fail to recognize that legally reducing one's tax rate can result in considerable savings that can be reinvested and compounded over time, creating a powerful financial tool. This freedom tool is often underutilized, and more individuals should know the potential benefits.
Source:?Marcus & Millichap
Low Risk of Banking Sector Disruption from Commercial Real Estate Defaults
Commercial real estate distress is currently low, and concerns surrounding high concentrations of commercial real estate portfolios held by local and regional banks are largely unfounded. The volume of commercial real estate debt maturing in 2023 ranges between $400 billion and $728 billion, and loan underwriting has been more stringent since the global financial crisis. The majority of impending loan maturities originated five to seven years ago. Over the last five years, CRE property revenues have increased by about 25 percent on average across the sector. Risk prevalence varies by property type, with industrial and multifamily sectors experiencing revenue gains, while office properties face higher risk profiles due to nominal rent growth and rising vacancy rates. While banks hold more than half of the commercial real estate debt set to mature this year, substantial distress in commercial properties has not materialized, limiting risks posed to depository institutions. Regional or local banks with more real estate-concentrated portfolios face the highest risk profile, but many could use loan workouts, extensions, and other means to mitigate risk. Experts agree that the situations faced by Silicon Valley Bank and Signature Bank are not comparable to most small banks with more commercial real estate-centric portfolios.
In conclusion, we believe the commercial real estate sector has?a positive outlook and benefits from its diversified segments, geographies, and demand drivers. This allows banks to hedge against risk by diversifying portfolios based on various factors. While some properties may face near-term complications from Federal Reserve rate hikes, the majority of debt held by banks has significant equity or years before maturity, making it unlikely for them to face distress. Therefore, The Requity Group believes that the risk of banking sector disruption from commercial real estate defaults is low.
Click here?to read the full article!
To join our investor community and stay updated on future opportunities, check out www.therequitygroup.com or set up a call with our head of investor relations, Luis Velez by clicking here.