Every year we reflect on our performance as a company and what value we provide our investor community. Through this process, we leverage our resources and 30-plus years of experience to provide better service and opportunities to our employees and investors. It is with little surprise that 2023 has served up a few more challenges than we have seen since 2009. Interest rates, inflation, material delays, and a COVID hangover remain. However, like most of you, when uncertainty surrounds us, we utilize our resources and experience to seek advice, direction, and professional guidance. Even in good times, we always welcome the views of experts because we are constantly learning and working diligently to be a value-add partner to our investors.
When we started this business in 2008, we intended to acquire or build assets that could cash flow for 5 to 10 years. However, from 2016 through 2021, the model shifted as real estate valuations skyrocketed, so we sold, and our investors did very well. Today’s investment environment is different; however, opportunities are still available if you know what to ask and where to look.
Below is a link to a recent podcast that echoes our business position today and in the foreseeable future. Willy Walker, Chairman and CEO of Walker Dunlop, is the host. He interviews Dr. Peter Linneman, Economist, Professor Emeritus, The Wharton School of Business, discussing many areas in CRE and why CRE has and will perform if you have a long-term horizon. These two experts are considered top of their class with tremendous experience and historical knowledge.
“If you’re in real estate and you have capital and courage when others don’t, you’re going to do well.” Dr. Peter Linneman.
As we advance, we have the experience, fortitude, and network to find and secure assets that can cash flow for many years and be longer-term holds. In addition, institutional capital such as Blackstone, who recently raised another $30 billion to deploy to CRE, with a significant focus on multifamily, hospitality, and rental housing, realizes the opportunity. Another $30 billion on top of $300 billion over the past 20 years is serious firepower as current markets are positioned to open up new opportunities.
From a historical view, analysis from past decades indicates CRE produced on the low end a 7.2% annualized return, and on the high end, specifically multifamily, produced a 9.8% return for investors with a ten-year hold period. Overall, CRE continues to perform over time for passive investors. The moral of the story is that patience and experienced capital will win.