Dear Investor,
The most significant opportunities are often found during times of uncertainty.
While the current high-interest rate environment may initially seem daunting, it also thins out the competition, leaving more room for strategic long-term investors to operate.
Higher interest rates temporarily lower valuations by increasing borrowing costs, lowering leverage, and ultimately increasing cap rates.
This confluence of events also creates buying opportunities. If a sponsor can acquire assets at a discount because of higher interest rates and later refinance loans when the rates come down, reducing the debt service, opportunity can be captured.
This opportunity can be compounded when you also have pending supply constraints, like what we'll see starting in late 2025.
You can see below that new starts are plummeting and are expected to continue as interest rates remain elevated. Ultimately, this will lead to a material undersupply of new apartments in late '25 early '26.
By way of disclosure, we have an advertising relationship with 37th Parallel, meaning we get paid for making this introduction and sharing this content. As always with these types of deals, consider this an introduction and not a recommendation. Every deal is unique and the responsibility to vet any and every deal you invest in still lies with you. This opportunity is available to accredited investors only.
It's not easy to invest based on fundamental wisdom from Warren Buttet, "be fearful when others are greedy and to be greedy only when others are fearful."
His contrarian point though isn't just about swimming against the tide on a whim.
It's the courage to trust your well-founded analysis even amidst widespread doubt.
Acting now, when the evidence seems clear regarding the future demand/supply fundamentals, could be something your future self will thank you for.
There's a reason why KKR just purchased 5,100 units from Quarterra for $2.1 Billion, that's $411K per unit, a strong premium in today's market.
And why, in April, Blackstone announced a $10 Billion acquisition of Apartment Income REIT (AIR) to take their portfolio of 76 apartment communities private.
Their commentary is notably similar:
- Long-term apartment demand fundamentals look strong,
- Interest rates are expected to come down, providing the opportunity for leverage increases in future years, and
- Supply is expected to be limited starting in late '25 and to continue. This has historically driven better-than-average market rent increases.
Investors who can position themselves now with a proven acquisitions and asset management firm like 37th Parallel should have a significant upside opportunity as multifamily improves.
37th Parallel holds a 100% profitable track record since 2008 with over $1 Billion in transaction volume across several market cycles, Covid, and this interest rate cycle.
Their tagline is remarkably appropriate, "Conservative Approach. Proven Results."
Go visit their learning center. And, keep in mind, White Coat Investors get special fee credits with any allocation in their single asset or fund investment platforms.
Learn More About 37th Parallel Today!
Jim and Brett
James M. Dahle, MD, FACEPFounder, The White Coat Investor
Brett Stevens, MBA
COO, The White Coat Investor
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