Best Performance
This is a question for LP investors in real estate. Through all the carnage of the last 3-4 years, which firms have you seen generally come through with the strongest relative performance?
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Based on the most helpful WSO content, here are some insights on firms that have shown strong relative performance in real estate:
For more detailed information, you can refer to the PERE 30 list, which ranks the top firms in real estate private equity: http://www.perenews.com/resources/PERE%2030/PERE_30_2010.pdf</a">PERE 30 List.
Sources: Real Estate Q&A, Top firms for distressed investing. Solving for brand and deal experience more than ability to growth within the organization., Real Estate Q&A, Top firms for distressed investing. Solving for brand and deal experience more than ability to growth within the organization., PE Investment Activity Amidst Spiraling Markets
Monitor a lot of syndicators and people might MS me into oblivion for stating this, but sadly Cardone Capital has been doing better than the majority of MF syndicators. In part due to their extremely low leverage and the fact that they did long term fixed financing. He also didn't really do value-adds, just bought good looking core deals with positive cash flow. He pays his investors minimal distributions that are worse than a money market, but his investors are still happy theyre collecting money. His cost of capital on the equity side is so low I guess he can do this.
I think he's the biggest douche around and his stupid 10x brand is annoying, but due to his size, low leverage, core deals, and cheap cost of capital, he manages to weather the storm well.
Cardone Capital bought several (maybe many) 4.00% cap rate deals with floating rate debt at >70% LTV...
No one huh? So basically just a bloodbath out there,
Yeah the only real answer was not to play at the valuations of the past 2-3 years. Groups that were able to get fixed rate financing on there deals are doing ok, but nobody likes the basis they bought at from probably 2020 onward. It's not really feasible to buy something at a sub 4% cap rate (which for some reason everything was trading at) and have your valuation stay the same after interest rates go to 6%+.
I am a multifamily operator but from what my firm acquired plus looking at other firms’ deals, it seems like there was a real tipping point in values starting Q2 2021. Most deals closed at the beginning of that quarter or earlier are okay basis-wise - not good, but okay. Won’t lose money provided you don’t have a bridge loan with unachievable extension tests and planned for a 5+ year hold. These would be deals tied up just after NMHC 2021.
The next wave after that (call it closing June-ish or later 2021) appears to have had a non-linear increase in valuation, which also dovetails with the start of crazy lease trade-outs across the Sunbelt. These are the deals that were completely DOA given the going in basis. However, I am actually most interested in how discretionary funds that acquired during that period perform vs benchmarks - to me, that will show which operators are in fact strong operators and have a sophisticated Asset Management function.
This is such a silly question. In what asset class? Even the best office-focused firms are going to be doing worse than bad MF-focused firms. You need to compare within asset classes, and probably within specific geographies as well.
Even beyond that, how does one judge? What do you define as "performance"? A firm that bought nothing from 2015-2022 is going to have great "performance" from a yield perspective, because their basis is comparatively low. Shouldn't we be comparing individual deals that have relatively similar transaction profiles? Maybe Opex Realty LLC has done an amazing job at keeping cost down, but happened to have a lot of floating rate debt and so all their cash is being eaten up by debt service, whereas Rate Cap LLC seems to be running deals which have a ton of economic vacancy and hugely expensive operations, but wisely bought interest rate caps at attractive pricing and so is generating more cash flow. Which is "performing" "better"? I know my answer, but an LP might care a lot more about the money coming into their pocket rather than the actual performance of the asset...
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