The real estate firm offers solutions for handling changes in the current market.
NEW YORK, NY / ACCESSWIRE / March 15, 2024 / EquityMultiple, a leading real estate investment platform, today outlined its forward-looking theory for the remainder of 2024, spotlighting strategic opportunities within real estate private credit and equity investments amidst a shifting interest rate environment for individual investors. Drawing on comprehensive market analysis and proprietary insights, EquityMultiple presents an informed perspective on navigating real estate markets for the benefit of self-directed investors.
As detailed in EquityMultiple’s recent publications, “CRE Sector Outlook – Above the Tree Line” and the ” 2024 Outlook Whitepaper,” the company leverages an in-depth understanding of macroeconomic factors, including cap rates, interest rate dynamics, first-party data, and proprietary algorithms to guide its investment strategies. The firm’s analysis of the current market environment suggests three critical takeaways for individual accredited investors:
- The interest rate dynamics suggested by the Federal Reserve at recent FOMC meetings do not necessarily portend predictable increases in real estate values on a definitive time scale.
- A diversified blend of real estate private equity and debt may position investors best in a fluid interest rate environment.
- Temporal diversification and liquidity are critical.
Navigating a Dynamic Interest Rate Environment
After an aggressive period of contractionary monetary policy, the Federal Reserve has signaled rate cuts throughout 2024. However, the timing and magnitude of such cuts is unknown. Rate changes undoubtedly influence both the availability and attractiveness of CRE private credit and equity investments. As EquityMultiple makes clear in recent research publications: investors shouldn’t bet too closely on any specific outcome, and a blend of private credit and equity investments, allocated over time, may serve investors best.
Real Estate Private Equity: Capitalizing on Market Adjustments
The anticipated stabilization and potential rate reduction may catalyze a rebound in property values, offering a strategic window for investment in undervalued assets. This may be especially true given the record volume of CRE loans coming to maturity in 2024. However, EquityMultiple’s research indicates that interest rates may not have as direct an impact on property values as some of the current literature suggests.
Charles de Andrade, Director of Capital Markets at EquityMultiple, said, “It’s almost taken as gospel that interest rates move inversely with cap rates. While this stands to reason, we hold that this is more indirect correlation than causation. Research by Dr. Peter Linneman and others shows that investment fund flows, proxied by mortgage flows as a percentage of GDP, as well as the unemployment rate, directly impact investment demand, which indirectly impacts cap rates, and hence valuations. This is perhaps a less clear picture than simply looking at our expectations for interest rates through the rest of the year.”
Therefore, EquityMultiple sees opportunity in real estate private equity but expects the timing of opportunities to be less obvious and predictable than some pundits are presenting. Said EquityMultiple Chief Investment Officer Marious Sjlusen, “No doubt there’s a ‘buy the dip’ opportunity here, but what that dip actually looks like won’t be clear until the dust settles. The Fed’s telegraphing alone doesn’t tell us. The best way forward for investors is to allocate broadly across equity opportunities across a wider timeframe. We empower investors to do this with our national reach, steady deal flow, and low minimums.”
Real Estate Private Credit: A Strategic Play
EquityMultiple identified real estate private credit as a timely opportunity nearly a year ago. The firm believes that investments in private CRE debt offer the potential for strong risk-adjusted returns in this market environment for several reasons:
- Traditional lending institutions have tightened balance sheets and lending standards in response to rate risk and volatility. This environment creates a favorable setting for real estate private credit, promising attractive returns for discerning investors.
- Rates remain elevated, and even with a softening of inflation, the firm believes we could be entering a “higher for longer” regime.
- With broadly strong economic indicators and a shortfall of market-rate rental units, there is still plenty of demand for project capital, particularly in multifamily lending.
These conditions open the door for alternative financing sources like EquityMultiple to offer vital capital to middle-market sponsors and developers. EquityMultiple’s lending platform is the basis of the Ascent Income Fund, a perpetual private REIT that allows individual investors to tap in for a minimum investment as low as $20K. The Fund has delivered a 13.1% distributed yield as of March 2024.
“Although rates may come down this year, we don’t know when and by how much. So we remain bullish on real estate private credit. It’s worth noting too that real estate debt is a fixed-income product and can be incorporated into an investment portfolio within the broader ‘bond’ allocation while enhancing returns and insulating against inflation. We encourage our investors to diversify to real estate private equity as well, which can perform similarly within a portfolio’s traditional ‘equity’ allocation, to gain exposure to the potential upside, especially as rates come down. Logically, any investment decisions should be made in a long-term context and according to personal risk appetites and investment objectives,” said EquityMultiple Chief Investment Officer Marious Sjlusen.
About EquityMultiple
EquityMultiple is a leading investment management and technology firm that offers unique real estate private equity and private credit opportunities to accredited investors. With a portfolio that has participated in over $5 billion in commercial real estate transactions since 2015, EquityMultiple partners with experienced real estate operators in strong markets across the country. The firm’s innovative platform provides investors with access to individual properties and funds, aligning cutting-edge technology with institutional-quality real estate investing. For more information, please visit EquityMultiple.com.
Contact Information
Mike Albanese
SOURCE: EquityMultiple
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