We are Seeing Distressed Priced Real Estate Assets Now...Some Thoughts

Our Team at Avid Realty Partners is seeing distressed real estate opportunities right now, and we are focused on acquiring multifamily apartment and industrial (distribution, manufacturing, flex) facilities. If you have any interest in investing into solid cash flowing hard assets at discounted prices, please reach out to me directly. My email is [email protected] and my cell phone is +1-314-495-6665.

Here are some big picture thoughts:

There is a complete lack of buyers out there right now because so many buyers are taking a wait and see approach in the face of great unknowns. This means the supply/demand of buyers and sellers is out of whack, and has led to some dislocated pricing opportunities. We are believers that it's time to be greedy when others are fearful, and there is a lot of fear out there right now.

The stock market has rallied in a very meaningful way because A) the government is providing substantial stimulus and unemployment money to people, B) the Fed is supporting various Bond markets, and C) the Fed is pursuing Quantitative easing;

We also think the stock market is looking ahead to a post-Covid recovery (whether that's U-shaped, V-shaped, Nike Swoosh-shaped, etc remains TBD) as vaccine progress is made, and as early-impacted countries like China reopen for business.

Here is a little more detail on Multifamily Apartments:

April rent collections totaled about four points worse than typical, not too bad. Across our portfolio we collected about 92% of billed revenues in April, versus typical collections of 96% of billed revenues. Tenants are generally paying and understand there are no free rides in life. May collections could be worse but we do not see any catastrophic scenarios unfolding;

Federal government stimulus checks and enhanced state unemployment benefits are providing much needed cash to Residents that they are using to pay rent, make their car payments, buy food, and survive. Cushman & Wakefield put out an excellent market research piece a few days ago (here https://bit.ly/2yYzBxW) that shows how much benefits are being provided in each market and they basically concluded that CARES Stimulus + Full State Unemployment amounts to 5-10 months of rent in most Southeast US markets;

Everyone needs to live somewhere, and this is not going to change anytime soon. In fact, we see apartments that rent for $800-$1,100 per month (in places like TX FL, NC, SC, GA) as being somewhat defensive as Residents in more expensive apartments ($1,200-$2,000 per month) downgrade into these cheaper Class B/C apartments to save money;

We expect at least a modest shift back from home buying to renting. While home ownership rates have been rising the past few years (following a 9-point decline in home ownership rates following the Great Recession), we think there will be a shift back to renting because renting is still cheaper than owning, and because some wealth has been destroyed amid the Covid Pandemic with job losses and the stock market sell-off.

We see opportunities to buy multifamily at 10%-20% discounts versus pricing from three months ago.

Short thoughts on Industrial markets:

Industrial facilities remain very well positioned to perform strongly in the future with the move to home delivery, touchless everything, and enhanced logistics supply chains accelerated by the Covid Pandemic;

We see some companies raising cash to survive by selling off their facilities (sale-leaseback), particularly some manufacturing and flex firms. These companies must raise cash now to survive, and they are motivated Sellers.

We see few buyers out there deploying capital right now, so cap-rates have moved sharply higher (debt financing is also harder to obtain, but certainly not impossible).

What are you seeing out there? Do you agree that now is an opportune time to deploy capital at lower prices, or do you feel better buying opportunities will be seen in the months and quarters ahead? Please share your thoughts.

Thank you,

Craig,

[email protected]

cell 314-495-6665