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What does commercial real estate investing look like in a post-COVID world?

Email sent: May 1, 2020 10:14pm
See the rest of this month’s news in our Street Views newsletter.

Real Estate Investing in a Post-COVID-19 Economy

Watch the Live Stream On-Demand

Last week, CrowdStreet hosted a special live stream event moderated by Peter Grant of The Wall Street Journal. Melissa Reagen of Nuveen Real Estate and CrowdStreet’s Ian Formigle discussed how the commercial real estate industry is reacting to COVID-19 and what investors could consider when evaluating future investment opportunities.

 

Peter, having worked as a journalist during the down markets of the early nineties–when the motto was “stay alive to ‘95”–as well as the 2008 financial crisis, pointed out that times like these are when investors can make enormous fortunes, provided you bet early and bet smart. Given that COVID-19 didn’t really hit the American markets until March, we are still in the early stages of this new economic cycle and Q2 data–earnings call, balance sheets, rent collections, etc.–will ultimately provide a clearer view of the state (and future) of the commercial real estate market.

 

What do we know so far?

  • Hospitality occupancies have dropped more than 60% year-over-year.
  • In April, retail owners were only able to collect about 20-30% of rents from their retail tenants. Even large, nation-wide retailers like Neiman Marcus and JCPenney are risking bankruptcy. 
  • Growing metros with diversified employment bases like Austin and Denver are the most likely to bounce back first. Cities that rely heavily on one industry, like Las Vegas, Orlando, and New Orleans, will likely recover much slower. 
  • With steel prices dropping, and perhaps a coming drop in labor costs, developers will be able to build at cheaper costs than they did at the beginning of the year. If a building isn’t meant to lease up for 18-24 months, we could be in an expansionary cycle by the time that property hits the market.

The group discussed this and much more during the hour-long live stream.

Investor Roundtable with The Motley Fool

Tune in May 28th for our Upcoming Live Event

Join us on May 28th at 10:00 AM PT for a live roundtable discussion with a few of our active investors as they discuss their personal investing strategies given the current state of the economy. Co-hosted by Matt Argersinger, lead advisor at The Motley Fool, and Ian Formigle, this live stream event gives you the opportunity to hear from other investors as they navigate investing in a market dominated by COVID-19.

 

These are the times when you can make enormous fortunes. Some of the biggest names in real estate today are the people who bet early and bet smart on those early downturns.

- Peter Grant, Editor, The Wall Street Journal

What You Need to Know About “Build to Rent” (BTR): A Break-Through in Rental Housing

Build-to-Rent takes the best aspects of single-family rentals and upgrades the experience by developing all the homes inside a professionally managed community. These BTR properties aren’t just a low-density multifamily property or a locationally-clustered single-family rental portfolio. They are much more akin to traditional, gated residential neighborhoods with great community amenities–swimming pools, tennis courts, dog parks–and professional management without homeowners association (HOA) fees.

 

CrowdStreet is excited to bring this new asset class to the Marketplace for many reasons. First off, there is finally sufficient 3rd-party data for our Investments team to review a sponsor’s underwriting and business plan in accordance with our deal review process. Multifamily agency lenders are now willing to lend for this asset type, enabling sponsors to obtain longer term and lower interest rates than they would find from banks or other private lenders. Our Investments team also believes in the demographic tailwinds associated with this asset class, thanks in large part to the BTR amenities designed to cater to millennials (and without the need for a hefty downpayment). 

 

Overall, the timing, proof of concept, and market tailwinds make the Build-to-Rent asset class a very interesting opportunity for investors to review and consider and we’re looking forward to launching BTR deals soon.

The Importance of HUD Loans for Commercial Real Estate Projects

There is something to be said for investing in a property backed by U.S. agencies. Similar to other federal agencies like Freddie Mac and Fannie Mae, the U.S. Department of Housing and Urban Development (HUD) is a federal agency that primarily focuses on long-term, fixed-rate financing for apartments. However, HUD does not finance loans–they insure 100% of the loan in case there is a default, providing greater security for the lender. HUD typically only provides these ultra-competitive loans to a small pool of sponsors that undergo an extensive vetting process which often deters many from applying.

 

As an investor, if you see a HUD-insured project on the CrowdStreet Marketplace, that means you are working with a sophisticated sponsor with a proven track record–HUD takes a “one strike and you’re out” approach–that has taken additional precautions to improve the probability of the success of their project.

The Latest From StreetBeats

In our most recent investor update, Brent Hieggelke talks with Sriram Ganesan about why he is interested in investing in medical offices and data centers, especially in the current market, as well as why cash yield is so important to him.

 

Get StreetBeats delivered right to your inbox weekly. Subscribe now.

 

Active Offerings

 
 

RD Real Estate Debt Fund II LP

Access an actively-managed, diversified portfolio of acquisition loans, construction loans, and refinancings for commercial and non-owner occupied residential real estate projects in urban areas in the United States.

 

View the details.

 

Exchange at 1105

A 198-unit, HUD-financed, Class-A multifamily development located in LaGrange, GA, a bedroom community of Atlanta.

 

View the details.

 

Sonata at Columbia Station

Class-A multifamily in downtown Seattle, a Top 10 ULI market, with attractive basis and favorable loan terms.

 

View the details.

 

Christina Managed Portfolio 4

Premium opportunity to own a piece of Los Angeles, California, in a portfolio managed by a veteran sponsor with over 40 years of success in the market.

 

View the details

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This communication is for informational purposes only and should not be regarded as a recommendation, an offer to sell securities, or a solicitation of an offer to buy any investment products, financial products, or services, including any securities issued by CrowdStreet Blended Portfolio I, LLC.  Any information contained herein is believed by CrowdStreet, Inc. (“CrowdStreet”) to be reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor. No part of this email (or its attachments) is intended to be binding on CrowdStreet or to supersede any issuer offering materials.  CrowdStreet is not a registered broker-dealer or investment adviser. We recommend that you consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity.

 

Information in this communication, including information regarding targeted returns and investment performance, is provided by the sponsor of the investment opportunity and is subject to change. Forward-looking statements, hypothetical information or calculations, financial estimates and targeted returns are inherently uncertain. Such information should not be used as a primary basis for an investor’s decision to invest. Investment opportunities on the CrowdStreet Marketplace are speculative and involve substantial risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital.  

 

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