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Too Much Right Now

February 2024 Insight

The past couple years have been slower than standard in our world, with very little transaction volume and most of our attention focused on improving operations and preparing for the near inevitable (our opinion) spike in opportunity we saw coming. The slow times are gone, the exiting times are here, and that means our time is at a premium. While all of us Altusians are working more hours, it is important we don’t drop the ball on more important things in our lives…family, health, personal growth, etc. This means our “don’t do list” becomes as important as our “to do list”. Over the past five days over 50% of our team has been traveling; raising money, doing due diligence, and holding project meetings with various stakeholders. In the next five days we are adding two more team members, having one team member move to a new role, one more opening is being sent to a recruiter, and another position is being created for an expected hire in a month or two. Year end tax work remains on schedule, which is a sizeable time commitment for our accounting and finance team.

I have been on the road all week traveling with valuable meetings filling up my daily schedule. Using my own “don’t do list”, one of the casualties is the more comprehensive Altus Insight that we send out to our investing community every month. Barring any unforeseen nonprofessional occurrences in my life, I commit to getting back on the horse for the March Insight. In the meantime, when contemplating the current situation, there are three past Insights that came to mind that could be worth reconsidering:

  1. Why Here, Why Now: This Insight explores the pros and cons of a fund structure versus investing via single purpose entities (SPEs) in the current real estate climate. Nothing has changed since published, except that maybe it is even more relevant: https://www.altusequity.com/why-here-why-now/
  2. Take it to the Bank: With four purchase opportunities currently under contract or LOI (with an additional five properties being sold), and other properties requiring financing for improvements, we are dealing with a lot of lenders. The lack of knowledge of the collateral type continues to astound me, and the manner in which the lenders treat their revenue sources (clients/borrowers) is flabbergasting. This ineptitude exists due the regulatory protection afforded by the government, but even then traditional lenders are losing market share to private lenders despite having every advantage (fractional banking, cost of capital, etc.). Borrowers are more and more willing to pay the higher cost of private debt to avoid the craziness of the traditional bank lenders. To be absolutely clear, there are some very good bank lenders, and we are grateful to work with several of them. But they are the exception, not the rule. https://www.altusequity.com/take-it-to-the-bank/
  3. Forrest’s Theory of Relativity (Reprise): As mentioned above, we are suddenly very busy with purchase and sale transactions. Many would view this as contradictory. But the key is relative value between where we can sell and where we can buy. Focus specifically on the latter part of the Insight and the discussion of buying and selling within the same asset class and markets. Altus was not very active when the market was at its absolute peak, and it could be asked why we weren’t selling to take advantage of it. But while selling would have been easy, buying was nearly impossible, so there was little advantage to the trade. Said another way, there was little margin between where we could sell and where we could buy. That margin, as measured by value (not specifically price) has widened considerably, which translates directly into opportunity for Altus and our investors. It doesn’t mean it is easy and the relative value trade will always be successful, but margins are such that it certainly makes sense to try in many cases. Also of note, our historical preference towards long term fixed rate (and usually assumable) financing is paying off handsomely despite the higher short-term costs when the financing was put into place. It is that assumable financing in part that is allowing us to sell at the top of the current market. https://www.altusequity.com/forrests-theory-of-relativity-reprise/.

Happy Investing.

About the Author: Forrest Jinks is CEO of Altus Equity Group Inc and a licensed real estate broker. Forrest has decades of experience as principal in a variety of alternative investment segments including real estate (residential rehab, in-fill development, multi-family, office and retail), debt, and small business start-up (online marketing and site retail). He can be reached at fjinks@altusequity.com.

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