From the Desk of CF Capital: November Investor Report

Hello, Friends and Investors.

We hope this message finds you well as we approach the end of the year! With Halloween behind us and Thanksgiving around the corner, there’s much to be grateful for. In October, we had the privilege of supporting Maryhurst—an extraordinary organization serving Kentucky's children affected by neglect and abuse—by participating in their Halloween Trunk or Treat event as part of our commitment to community service.

November is shaping up to be a pivotal month, both for our business and within the broader economic and political landscape. The results of this week’s election have brought questions and opportunities, and we are carefully monitoring how the evolving environment might impact the multifamily real estate sector. As the new administration and Congress prepare to implement their agendas, we remain focused on adapting to any shifts in market conditions that lie ahead.

CF Capital Updates and Insights

1. Election and Market Impact on Multifamily Real Estate

As the dust settles on the 2024 election, we are assessing potential regulatory and financial policy changes that could influence multifamily real estate. Political shifts are likely to impact capital markets, interest rates, and tax incentives, which play crucial roles in our investment strategy. With Republicans controlling all three branches of government, we anticipate a faster pace of policy change compared to recent years, potentially leading to substantial shifts in our industry. We will continue to analyze these developments and keep you updated on their implications for our portfolio and future acquisitions.

2. Capital Markets & Economic Trends

In September, the Federal Reserve initiated a rate-cutting cycle, starting with a 50 basis-point reduction after a period of significant rate hikes—offering some relief to the capital markets. However, rising treasury yields have offset some of these benefits, affecting the overall cost of capital within real estate. The Fed’s recent 25 basis-point cut in November and the market’s anticipation of another cut in December may bring additional relief for borrowers. Our focus remains on leveraging favorable financing options, including assumed loans with advantageous terms, to create sustained value for partners like you.

3. Recent Speaking Engagements

Our team was active at industry events this month. Tyler spoke at the Kentucky Commercial Real Estate Conference (KCREC), hosted by CCIM and the Louisville Bar Association, where he discussed trends in multifamily financing and shared best practices. This was a great opportunity to showcase our strategic approach and connect with industry leaders.

In addition, Bryan joined CBRE’s "Behind Closed Deals" podcast, where he shared insights on multifamily investments, capital markets, and the keys to succeeding in today’s competitive real estate environment. We encourage you to listen to this episode—it offers a unique perspective on our strategy and the market dynamics shaping our approach. (Click here to watch episode)

4. New Partnership and Website Redesign

We’re thrilled to announce a partnership with Connect CREative, a highly respected agency specializing in marketing, PR, media, and web development. This collaboration marks an exciting phase for us, aimed at enhancing our brand presence and expanding our investor base. A significant part of this collaboration is the development of our new website, set to launch in January. This refreshed online presence will provide a more user-friendly experience, helping us better showcase our goals and accomplishments. Through this partnership, we expect our network of strategic partners and overall platform capacity to grow significantly, creating even more opportunities for our investor community. Stay tuned for more exciting announcements!

5. Island Club Acquisition Closing This Month

We’re pleased to announce that we’re on track to close the acquisition of Island Club Apartments, a 314-unit community in the Eagle Creek area of Indianapolis, IN. This property represents a key addition to our portfolio with its inherent value, attractive assumed debt, and low-risk business plan, aligning perfectly with our growth strategy. Renovations will begin soon, and we’re optimistic about the asset’s potential to deliver strong returns for our partners.

6. Staying the Course Amid Change

In closing, we deeply appreciate your continued trust and partnership as we navigate this dynamic market together. Our disciplined approach and commitment to creating long-term value remain at the core of our philosophy, fueling our optimism about the journey ahead. As always, please feel free to reach out with any questions about your investments or upcoming projects.

Wishing you a successful November! We look forward to closing out 2024 with even greater progress and opportunities.

In Partnership,

Bryan & Tyler

PS. There's no higher compliment than you referring us to your friends, family, and colleagues. We'd be honored by the opportunity to become a part of their trusted networks. Share your experience investing with CF Capital & invite others to become an investor here.

From the Desk of CF Capital: October Investor Report

Hello Friends and Investors,

As we approach the cooler weather and earlier fall sunsets, we hope you and your family have been well. The new season reminds us that change is all around us—and not just in the weather. The economic and political landscape is undergoing significant shifts, as the Federal Reserve’s long-anticipated rate cuts have finally commenced. After an extended period of aggressive rate hikes, the first cut in September marked a potential turning point for capital markets and the economy at large. This change brings both challenges and opportunities, and we are keeping a close eye on how it impacts multifamily real estate.

Speaking of weather, Hurricane Helene's impact on our friends in Florida, Georgia, North Carolina South Carolina and Tennessee is immense and the rebuilding will be extensive to say the lease. Our hearts go out to the millions of people affected by this historic storm. Seeing the devastation in particular in Western North Carolina, a place near and dear to our hearts, has been heartbreaking. Knowing many people personally impacted by this catastrophe brings it close to home. Our prayers go out to all those affected.

In addition, the 2024 Presidential election is heating up, with less than a month until Election Day. The political climate is creating ripples throughout the economy, but we remain focused on long-term growth and stability in the face of uncertainty. Remember, it's more important than ever to make your voice heard as voters. While we navigate the noise, we're finding ways to position ourselves for success in any scenario.

Here’s a look at our current projects and market trends:

1. Portfolio Performance and Key Updates

Pending Acquisition Delayed: In September, we expected to close on Island Club, a 314-unit multifamily community in the Eagle Creek submarket of Indianapolis, IN. However, official loan assumption approval didn't come in until a couple of days ago (finally!), and we're now working through nuances with the seller on a recent insurance claim to ensure our partners interests are best represented ahead of closing. We’re now anticipating a closing this month, and are excited to begin the value-add process with renovations, which will enhance both tenant experience and property value. NOTE: We do have a few limited slots remaining available for investors if you'd like to get in on the action for this opportunity!

Financing Extension and Refinance: We are working through an agency refinance for one of our Louisville assets which is expected to close over the next 30-45 days. Our business plan of renovating 90% of the units has been completed and initial projected premiums have been out-paced significantly. We've also successfully completed 100% of the asset reposition, which included rebranding, a new playground, dog-park enhancements, new parking lot, new roofs throughout, renovated leasing office, a new mural, renovated common area hallways, new windows, dumpster corrals and more. We look forward to delivering further long-term stability to our investors and residents as a result of this successful refinance.

Operational Improvements: Our properties are generally seeing improved occupancy rates and stronger rent collections, even in a turbulent market where everyone is feeling the lingering impact of the historic inflation of the past few years. Proactive management strategies, enhanced by recent property upgrades, have paid off, and more projects are ongoing at several of our assets. We are especially pleased with the feedback from tenants, whose satisfaction is essential to our long-term success, a leading indicator to future renewal performance. There's always room for improvement, and we're continuing to focus on economic occupancy optimization, and expense ratio management as we move into Q4.

2. Market Trends, Insights & Opportunities
Economic Overview: The U.S. economy is in a moment of transition. The Fed's recent rate cuts signal a shift towards a more accommodative stance, and although inflationary pressures remain, we believe this opens new opportunities for real estate financing and growth. Multifamily real estate continues to be a resilient asset class, benefiting from strong rental demand across the country. Migration trends into our markets in the Midwest and Southeast remain steady and robust, which supports our long-term investment strategy.

Interest Rates & Financing: The reduction in federal funds rates offers some breathing room, but the bond markets remain volatile as the economic landscape adjusts. We are actively exploring opportunities to leverage this shift, particularly in sourcing debt for acquisitions and refinancing our existing portfolio. Loan assumptions with favorable terms, like our Island Club acquisition, are becoming a critical tool for navigating these financial conditions. Anecdotally, recently we've seen the acquisition market get a bit more agressive of late, with multiple pursuits being awarded to competitor investment groups putting down hard money day 1 and pursuing extremely aggressive purchase prices and compressed cap rates. Is this a sign of things to come? We will see. We continue to pursue smart growth through asymmetric risk/reward acquisitions through the inefficient market, and we will keep you informed of future opportunities. We are cautiously optimistic that we will be securing our next opportunity for your investment consideration by the end of this quarter.

Local Market Dynamics: Our targeted markets—Indiana, Kentucky, Ohio, and Tennessee—are experiencing steady population growth and economic expansion, which continue to support rental demand and stable property values. The moderate pace of new development in these regions, coupled with ongoing economic development, makes them attractive areas for long-term multifamily investment. While more volatile Sunbelt markets experience challenges from excess supply, our approach remains steady and strategic.

3. Looking Ahead
The last few months of 2024 promise to be eventful, with both the election and the economy's shifting tides. We remain focused on identifying value in these transitional times and are poised to capitalize on opportunities that align with our strategy of slow, steady, and calculated growth. Stay tuned for opportunities for your participation. We remain patient yet persistent in continued expansion of our portfolio.

As always, we appreciate your continued trust and partnership. We are committed to navigating the road ahead with you and remain available for any questions or discussions about your investment goals.

Here’s to a great fall season and continued success!

In Partnership,
Bryan & Tyler

From the Desk of CF Capital: September Investor Report

Hello Friends and Investors,

Hope you had a great Labor Day weekend and unofficial end to your summer! While the end of summer is always bittersweet, change is in the air with a new season right around the corner, bringing excitement and newness. Of course Fall includes favorite past-times like football, pumpkin spice lattes (PSLs anyone?!), colorful foliage depending on where you live, and generally comfortable temperatures across the country.

In this particular season, we're also in the midst of a historically significant 2024 Presidential election and we are anticipating potential rate cutting cycle to commence from the central bank beginning perhaps this month. Implications of the next few months will be momentous, for many years, as things play out. We invite you to make your voice heard, as it's our civic duty to be heard and our wishes to be reflected in the policies implemented across our government. We continue to pay close attention and to find opportunities that exist amidst the very loud noise.

On the ground level, we continue to see opportunity in our markets and within our existing portfolio, so we're excited to share a few updates.

1. Portfolio Performance and Key Updates

Pending Acquisition: In September, we are on track to finalize the acquisition of Island Club, a 314 Unit Multifamily community in the Eagle Creek submarket of Indianapolis, IN. This asset is expected to generate attractive returns due to it's location, inherent value, strong day 1 performance, accretive assumed financing, straightforward low-risk business plan and forced appreciation. We will begin renovations immediately upon closing, with completion anticipated by the end of Q4 2026. We are confident that this asset, with it's very attractive assumed debt and low-risk business plan, will significantly contribute to our portfolio’s performance and deliver consistent cash flow and capital appreciation for our partners.

Financing Extension Completed: In August, we successfully extended our financing for one of our communities in Indiana. Given the current state of the capital markets, we deemed it would be in the best interest of the investment for us to continue forward for another year to continue to drive value through further renovations and NOI growth, while the capital markets potentially ease further. For investors who are looking for an opportunity to protect their capital from persistent inflation, we are offering 12% yield on a promissory note to complete further interior unit renovations. We've included a section below for more details on this opportunity.

Operational Successes: Our portfolio continues to perform amidst the noise, with a notable recent increase in occupancy rates across our properties. While there continues to be work to be done (as always!), proactive management strategies and targeted marketing campaigns have successfully reduced vacancy rates and enhanced overall tenant satisfaction. We are also pleased to report that rent collections remain strong and above industry averages.

Property Upgrades: We are advancing with several property improvement projects designed to enhance tenant experience and increase property value. Recent upgrades include modernized amenities, data plan internet installations, and maintenance enhancements. Feedback from residents and our teams have been very positive, which bodes well for continued resident retention and satisfaction. As we take care of our residents, our investments are positioned for long-term success.

2. Market Trends, Insights & Opportunities

Economic Overview: The multifamily real estate market remains largely resilient despite broader economic fluctuations, a core benefit of investing in human shelter. Demand for rental properties continues to be extremely healthy, driven by factors such as domestic and international migration, and a relatively strong job market in most industries. Current economic indicators in our Midwest/Southeast region suggest a stable environment for real estate investments, with steady rental growth and low vacancy rates, yet we remain vigilant in the face of anticipated (and unanticipated) economic headwinds - largely focused on the macro level job market stability and consumer stability.

Interest Rates and Financing: Federal funds rates have been in a period of stabilization after the historic rate hiking cycle of the past two years, yet bond markets continue to exhibit a bit of volatility, based on the economic data reported and absorbed across the markets. We are leveraging favorable terms via loan assumptions (such as our current pending acquisition) on mortgages placed in the past 2.5+ years to optimize our capital structure and enhance overall returns for our investors, and are beginning to see some relief on the new origination side for deals available free & clear. Our team is closely monitoring market conditions to capitalize on any opportunities that exist during this "window of opportunity" buyer's market that persists, focused on positive leverage, acquisitions well below replacement value and low-risk value add business plans.

Local Market Dynamics & Upcoming Opportunities: Our targeted markets of the major MSAs in IN, KY, OH and TN are experiencing steady population growth and economic development and steady new multifamily development, retaining equilibrium and continued rent growth. These factors contribute to higher rental demand and a trickle down is property value appreciation, all things being equal. We continue to conduct thorough market research to identify emerging submarket trends and investment opportunities that align with our strategic goals. We will keep you informed as new secured opportunities arise that provide asymmetric risk to return potential with light value add B to B+ assets in A/B locations. Many markets outside of our target markets, such as major growth (read: boom or bust) markets throughout the Sunbelt, have seen challenging operational conditions due to major influxes of new supply delivered to the market, placing downward pressure on revenue. We're reminded that in a market like this, slow and steady wins the race.

3. Appreciation & Long Term Mindset

We want to extend our sincere gratitude to each of you for your continued support and confidence in our multifamily real estate ventures during these transitional times in our economic and political history. Your partnership is instrumental in driving our collective success, and we are committed to delivering exceptional results for the long haul.

Should you have any questions or wish to speak to us further about your objectives or about anticipated opportunities, please do not hesitate to reach out to us. We are here to support you and ensure your investment experience is rewarding, enjoyable and transparent.

Thank you once again for your partnership. We look forward to continuing our journey together and achieving new milestones in the coming months. Here's to wishing you a great September!

In Partnership,
Bryan & Tyler

How the Bond Market Impacts Real Estate

The bond market is a critical component of the global financial system, where entities like governments, municipalities, and corporations raise funds by issuing debt securities to investors. While it may appear to operate distinctly from the real estate market, there is a closely knit relationship between the two. Understanding this interaction is key to recognizing not only the current economic landscape but also to forecasting potential shifts in real estate values and interest rates.

Understanding Interest Rate Movements

The bond market's influence extends greatly into real estate through interest rates. Bond yields, which move inversely to bond prices, often presage changes in mortgage rates. This correlation between bond yields and mortgage rates is fundamental; as investors demand higher yields on bonds, lenders adjust mortgage rates accordingly to remain competitive. This dynamic can directly influence the real estate market by altering the affordability of loans for borrowers, potentially dampening market activity when rates are high.

Furthermore, an uptrend in bond yields translates into steeper borrowing costs. This scenario affects not only prospective homeowners but also real estate investors and developers who rely on financing for purchasing and building projects. Higher mortgage rates can slow down the real estate market by compressing leveraged yields and impacting valuations.

Real Estate Investment Trusts (REITs) Under the Microscope

Real Estate Investment Trusts (REITs) offer a clear lens through which the effects of bond market fluctuations can be observed. As entities that finance real estate through investor shares, REITs are sensitive to changes in the bond market due to their reliance on financing and their payout structure to investors. When bond yields are high, the fixed income they offer can become more appealing than the variable dividends of REITs, potentially detracting from REIT investments. Conversely, in environments of low bond yields, REITs might appear more attractive due to their higher yield potential.

Navigating Inflation's Terrain

Inflation significantly affects both the bond and real estate markets by influencing interest rates and bond yields. Inflation typically leads to higher bond yields as investors look for returns that offset the reduced purchasing power of future payments. This effect can create a challenging environment for real estate. On one hand, inflation can push property values and rents higher. On the other hand, it can increase borrowing costs through higher mortgage rates, complicating the impact on real estate investments.

From the Desk of CF Capital: August Investor Report

Hello Friends and Investors,

The last month has been quite eventful in our country and across the world. As the 2024 U.S. presidential election approaches, we expect tensions to remain high. In July, President Trump miraculously survived an assassination attempt, and President Biden decided to drop out of the race, with VP Kamala Harris emerging as the presumptive Democratic nominee. Meanwhile, the Federal Reserve hinted at potential rate cuts in September, leading to a decline in treasury yields following revised economic data. Are we on the brink of a soft landing, or is a hard landing more likely as recession expectations rise?

In addition to these domestic developments, global conflicts in the Middle East, Eastern Europe, and South Asia are intensifying, fueling fears of broader geopolitical tensions. As investors, it’s crucial to stay informed without becoming overwhelmed or pessimistic, especially with many events beyond our control.

These factors impact our portfolio management and short-term growth strategies. However, our focus remains firmly on the long term, and these current events are just that—current—and they too shall pass. Our North Star continues to be investing for the long term and managing through short-term noise. During both good times and bad, we aim to find opportunities where we can identify and drive value.

We’ve been saying that the current multifamily market in our region presents a “window of opportunity” to acquire attractive deals at a compelling basis—below replacement cost and well off the historic highs of recent years. Now, we are assessing whether this window will expand, prolong, or retract. With rates potentially declining, the market could become more conducive to transactions, which have largely stalled over the past year. However, this could also reignite irrational exuberance, driving pricing and cap rate compression, trends that have eased since mid-2022.

We remain nimble and prepared for either scenario, maintaining our long-term perspective while avoiding the trap of short-term volatility. Long-term trends are our calling card, and partners like you resonate with this approach, knowing that it’s impossible to “outsmart” the market consistently.

For investors on this journey with us, thank you for your continued trust in our team to steward your capital. We are committed to elevating our performance for your success. For those considering joining us, we would be honored to discuss your goals, the current market conditions, and future opportunities.

Here's to wishing you a great month as the kids head back to school and routines return!

In Partnership,
Tyler & Bryan

Understanding Defensive Investing in Turbulent Times

stacks of pennies on a desk with person in background

During times of market volatility, defensive investing emerges as an anchor of stability. This investment strategy is relevant for institutional investors and high net worth individuals alike. Both of whom prioritize capital preservation and consistent returns over the tempest of market volatilities.

Philip Fisher's poignant observation that "The stock market is filled with individuals who know the price of everything, but the value of nothing," underscores the principle of defensive investing, applied to markets well beyond stocks. Fisher's wisdom reminds investors of the importance of discerning true value — which lies not in the erratic swings of market prices, but in the enduring strength and consistent performance of robust assets. Rather than focusing on the daily ticker, a defensive strategy involves selecting investments that demonstrate long-term stability and reliability, aligning perfectly with Fisher's philosophy.

The Essence of Defensive Investing

Defensive investing avoids the allure of speculative gains, focusing instead on stability and reliability. This approach prioritizes assets that remain strong during economic downturns, such as essential services, healthcare, and other consumer staples—sectors known for providing essential services irrespective of economic conditions, along with an asset like multifamily real estate.

Diversification: The Investor's Shield

"Diversification is a protection against ignorance; it makes very little sense for those who know what they're doing." —Warren Buffett

While Warren Buffett's approach to investing contains layers of strategic depth, the basic principle of diversification is still widely embraced as a key defensive tactic. Instead of putting all one's financial eggs in one basket, spreading investments across different types of assets helps shield an investor's portfolio from the negative effects of any single investment that may perform poorly.

Put simply, diversification means owning a variety of assets. This strategy can reduce the risk that an investor's overall portfolio will suffer if one particular investment decreases in value. It's like having different types of crops in a field; if one fails, the others may still thrive, providing a safety net.

The Pursuit of Quality

When building a solid portfolio, defensive investors look for high-quality assets supported by strong financial performance and stability. These are the investments selected for their proven resilience in tough economic times and serve as the anchor for a defensive investment strategy.

The Bulwark of Bonds

Fixed-income securities, like bonds, are extremely predictable stalwarts. They provide consistent income streams and maintain their footing due to low default risks, becoming a safe haven when the investment climate turns volatile.

Navigating a Smooth Course with Low Volatility Stocks

Defensive investors prefer low volatility stocks for their more predictable nature, allowing them to enjoy steadier, if not spectacular, returns—an approach that embodies the investment maxim "slow and steady wins the race."

Cash Reserves: The Strategic Reserve

Liquidity is a key yet often overlooked element in defensive investing. Maintaining a cash reserve is essential for investors, as it allows them to stay adaptable during market downturns and to seize investment opportunities that may appear, much like an emergency fund can help weather financial storms.

Timing and Patience: Navigating the Long Haul

Defensive investing advocates for a long-term perspective, focusing on the steady accumulation of wealth and its protection rather than trying to predict short-term market fluctuations. This strategy highlights the value of patience and the passage of time in creating a robust investment portfolio.

*Multifamily real estate remains in demand, complementing defensive investment strategies.*

Anchoring Stability with Multifamily Real Estate

Multifamily real estate, with its persistent demand regardless of economic cycles, naturally dovetails with the principles of defensive investing. This form of investment is not only about maintaining equilibrium but also about benefiting from diversification, cash flow, tax advantages, and appreciation potential.

Stability and Cash Flow

"Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world." Reflecting on the words of Franklin D. Roosevelt’s 's words, the allure of real estate as a stable and tangible asset becomes clear. It not only offers the promise of security but also the potential for generating consistent cash flow, making it a cornerstone for those seeking a defensive approach to investing.

Diversification Benefits

The unique characteristics of real estate can help counterbalance the performance of securities in a portfolio, providing a buffer against the ebb and flow of stock market volatilities and the surrounding economic climate.

Tax Advantages and Appreciation

Real estate's attractiveness in a defensive investment strategy is significantly enhanced by its tax benefits and potential for appreciation.

Tax Advantages:

Depreciation: Investors can deduct the property's depreciation from their taxable income, providing a valuable tax break.

Mortgage Interest and Property Tax Deductions: Reduces taxable income further.

1031 Exchanges: Allows deferring capital gains taxes by reinvesting the proceeds into another property.

Opportunity Zones: Offers tax incentives for investments in designated areas.

Appreciation:

Real estate values tend to increase over time, offering the potential for profit upon sale and contributing to long-term wealth growth.

Benefits for a Defensive Strategy:

Stability: The tax advantages improve returns while adding stability, fitting a defensive strategy's goal of wealth protection.

Inflation Protection: Appreciation can help maintain purchasing power over time, aligning with the objective of steady, risk-adjusted returns.

These aspects underline real estate’s role in safeguarding against market volatility and ensuring consistent, long-term value growth.

Strategic Considerations

The defensive investor must be astute in selecting properties in vibrant markets and managing costs and operations effectively to ensure real estate serves its intended role in the broader investment strategy.

Integrating Defensive and Growth Strategies

Adding multifamily real estate to your investment portfolio can be a smart move, especially when the goal is to fortify against unpredictable market swings. This kind of investment often brings stability and consistent income that can be hard to find in more volatile markets.

Defensive investing isn't just another choice—it's an essential part of any smart financial plan. Institutional investors and high net worth individuals alike are looking for ways to protect and grow their wealth, even when the economic outlook is volatile. As Benjamin Graham famously advised, investment is more about managing risks than chasing returns, and that advice is especially relevant today.

At CF Capital, our focus is on multifamily syndication, which allows our investors to pool their resources and invest in properties they might not have access to on their own. We're not about chasing the latest stock picks or jumping into volatile markets. Instead, we believe in the long-term stability and potential for passive income that multifamily properties can offer. Whether you're new to investing or looking to diversify your holdings, CF Capital is dedicated to helping you navigate these complex investments with confidence.

From the Desk of CF Capital: July Investor Report

Hello Friends and Investors,

We hope you had a happy and enjoyable 4th of July! As we move into the second half of the year, we are excited to share updates on our progress, team developments, and market outlook.

Team Updates

We are thrilled to welcome Leslie Andren as our new Managing Director of Asset Management. Leslie brings a wealth of experience in real estate asset management and will be instrumental in enhancing our portfolio's performance.
Bio: Leslie Andren has over 30 years of experience in commercial real estate across various roles and institutions. Starting in commercial real estate banking, she handled distressed debt and originated loans for major U.S. developers. Her career spans both distressed commercial real estate debt and multifamily investments. Leslie's employers include Continental Illinois National Bank & Trust, GE Capital Corporation, Bank of America, Prudential Insurance, Equity Residential, Moran & Company, Cushman & Wakefield, Alliance Holdings, Atlas Apartment Homes, VennPoint Real Estate, and Strategic Properties of North America. At Equity Residential, she acquired a $380 million portfolio in her first year and managed a 15,000-unit West Coast portfolio. Leslie co-founded Atlas Apartment Homes, establishing key departments and acquiring hundreds of millions in assets. She holds an AB in History from Kenyon College and an MBA in Finance and Real Estate from the University of Wisconsin, Madison, and has been a member of NMHC, ULI, and CREW Chicago.

Highlights and Personal Updates

Tyler Keynotes at the Strategic Capital Raise Summit

Our very own Tyler had the honor of delivering the keynote address at the Strategic Capital Raise Summit. His insights on "The Power of Mindset in Shaping Success" and ensuing effective capital raising strategies were well-received and sparked engaging discussions among industry leaders.

Summer Fun with the Kids

The summer has been a blast for our collective families! Our kids are enjoying swimming, basketball camps, and various summer camps and activities, making the most of the sunny days.

Celebrating Birthdays

This month, we celebrate the birthdays of Dan Michael and Leslie Andren, two of our phenomenal team members. Please join us in wishing them a fantastic year ahead!

Looking Forward: Second Half of 2024

As we begin a new quarter, we are focused on achieving our goals for the second half of the year. One of our current initiatives being to close on our active acquisition in Indianapolis, Island Club—Invest Now, which is expected to be no later than mid-Q3. We remain hyper-focused on optimizing operations within our existing portfolio and successfully navigating upcoming capital events to protect and secure investor equity. Our recent quarterly offsite was a great success, providing us with the opportunity to align our strategies and set ambitious targets. Our company runs on "Traction," and we relish in the opportunity to step out of the day-to-day to work on the business on an annual, quarterly and weekly basis. This edition of the quarterly offsite yielded exciting clarity on some existing initiatives and strategies to employ for us to get closer to our Vivid Vision.

Market Outlook

We remain optimistic about the multifamily real estate market, while fully sentient on the current market challenges. The capital markets remain volatile, and we anticipate that volatility to remain throughout Q3 and into Q4 as this election cycle kicks into high gear. On the ground in our target markets of the major MSAs in Kentucky, Indiana, Ohio and Tennessee, fundamentals and trends indicate a stable demand for quality housing (with mostly stable new product deliveries and absorption), and we are well positioned to capitalize on the most attractive opportunities. Our team is diligently interacting with and monitoring market conditions to make informed decisions that will drive growth and deliver value to our investors. We're continuing to underwrite a robust pipeline of potential acquisitions on a daily basis and expect the next opportunity for your consideration to be coming soon. We still believe we're in a window of opportunity to acquire assets at very attractive discounts that will not last when rate cuts come back into the picture.

Thank you for your continued support and partnership. We look forward to sharing more updates and successes with you in the coming months.

Best regards,
Tyler & Bryan

Preferred Equity: The Investment Vehicle You Don't Want to Overlook

two businessmen coming up with a strategy

Preferred equity is an investment strategy that combines features of debt and equity to meet the sophisticated demands of certain investments and market conditions utilized by primarily institutional investors and other private investors. Strategically positioned within the capital structure, preferred equity offers enhanced security and competitive returns, making it an integral component of diversified investment portfolios. Its compelling blend of steady income potential and priority in financial claims makes it ideal in certain capital stacks. Discover the difference preferred equity can have on your investments through today’s blog. Let’s explore the intricate mechanics, benefits, and strategic applications of preferred equity.

Understanding Preferred Equity

Preferred equity occupies a middle ground between debt and common equity, offering investors a fixed dividend and a preference in the payout hierarchy over common equity. The fixed dividends associated with preferred equity provide a predictable income stream, appealing to institutional investors seeking stability. Dividend preference ensures that preferred shareholders receive payments before common shareholders, adding a layer of security for preferred equity holders.

Another compelling feature of some preferred equity instruments is their convertible nature, which offers preferred equity investors the opportunity to transform their preferred shares into common equity upon certain conditions coming to bear. This opportunity for capital appreciation means having the stability of income from preferred equity with the growth prospects of common equity. As a result, you have a versatile investment structure designed for risk mitigation and upside potential. Furthermore, callability provides issuers with flexible capital management options, allowing for refinancing or restructuring as market conditions evolve.

The Strategic Role of Preferred Equity in Investment Portfolios

The inclusion of preferred equity in institutional investment portfolios plays several critical strategic roles.

Income Generation:

Preferred equity typically offers fixed dividends, essential for institutions like pension funds and insurance companies that depend on regular income.

Stability During Market Fluctuations:

Its lower volatility relative to common equity provides stability in times of market unrest, acting as a safeguard for investment portfolios.

Risk Management:

Serving as a safe harbor, preferred equity can help mitigate overall portfolio risk in volatile market conditions.

Diversification:

Blending characteristics of both equity and debt, it enhances portfolio diversification and contributes to a balance between risk and return.

Tool for Precise Portfolio Design:

The inherent flexibility of preferred equity enables the creation of tailored investment strategies that meet specific objectives of institutions.

Low angle of massive multifamily apartment

The multifamily real estate sector serves as a ripe asset class for the allocation of preferred equity

Preferred Equity in Multifamily Real Estate Investing

The multifamily real estate sector lends itself well to the utilization of preferred equity. Investments in this sector typically involve properties with a multitude of tenants and tend to generate a steady stream of rental income. Utilized often to bridge financing gaps, preferred equity in multifamily projects sits above common equity but below senior debt in the capital stack, making it an attractive financing source. When deployed properly on appropriate investments, preferred equity can also be accretive to common equity as its upside is capped at a certain figure.

The consistent dividends from preferred equity dovetail well with the predictable cash flows from multifamily properties, making it a particularly appealing option for institutional and private equity investors in search of stable and reliable income streams. Given its priority position ahead of common equity, preferred equity offers a measure of downside protection, which is essential in the sometimes-volatile real estate market.

Institutional and private equity investors can allocate capital towards multifamily real estate through various avenues, such as Real Estate Investment Trusts (REITs) and joint ventures, each offering differing risk-return dynamics. These engagement options allow investors to tailor their preferred equity investments in the multifamily space according to their specific strategic orientations.

Optimizing Investment Strategies in Multifamily Real Estate

The multifamily real estate sector, with its relative long-term stability and capacity for generating consistent cash flow, serves as a ripe asset class for the allocation of preferred equity. These properties often necessitate substantial capital for acquisition and operation, making the structured, lower-risk financing provided by preferred equity an attractive option. This method empowers institutional investors to partake in real estate ventures with a safety net, securing a prefatory claim on earnings and assets over common equity investors.

CF Capital, with our focus on acquiring and managing multifamily assets across the Midwest and Southeast, embodies a strategic approach toward real estate investment. Our firm positions itself as a conduit, co-investing with individual and institutional investors in high-quality multifamily housing investments while prioritizing stable cash flow, capital appreciation, and a margin of safety. This approach underlines the strategic value of incorporating preferred equity into the investment mix, leveraging CF Capital's expertise in acquisitions and management to yield superior risk-adjusted returns for investors.

Let us help you optimize your real estate investment allocations. Get in touch with us today!

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From the Desk of CF Capital: June Investor Report

Hello Friends and Investors,

Hope you're having a great start to the summer and you have some exciting plans to make the most of this fun part of the year. As we all take some time to enjoy the warmer weather and longer days, I want to take a moment to share some updates and insights into our company's journey and the opportunities that lie ahead.

Company Updates

Firstly, I’m thrilled to report that this quarter has been one of significant achievement for the CF Capital team and our partners. We successfully completed due diligence on our current acquisition for our Indianapolis Multifamily Investment at Island Club, onboarded an Investor Relations Associate (along with continued onboarding and integration with our Senior Real Estate Analyst and Regional Property Manager), and conducted a thorough recruitment leading to a narrowed final set of candidates for our open Director of Asset Management leadership role. These developments are not only a testament to our team's hard work and dedication but also signals our commitment to continued growth and expansion in the face of a changing market cycle. We're positioning our team and underlying systems for enduring growth for the coming decades of opportunity.

On the operational front, we have wrapped up renovations at one ~250 unit asset that began 3 years ago, and are currently wrapping up another renovation project on another ~130 unit project by the end of this month. Seeing these projects through while remaining on budget and transforming the physical aspects of two value-add investments is rewarding, financially and otherwise for our partners and our team. Furthermore, on the site level throughout the portfolio, we've been navigating the changing market conditions by acquiring talented leadership on site and replacing less than optimal performers. These efforts lead to lagging results which we expect to capture throughout peak leasing season where we find ourselves now.

Looking Ahead

Looking forward, the roadmap for wrapping up Q2 and for the next quarter is focused on a few core areas, including the following:

Navigating Refinances: Over the next 90 days, we are pursuing a couple of refinances and extensions on assets in the current portfolio as their current debt matures. Our focus remains on protecting equity and optimizing positioning for capital growth for a future time frame when market conditions are more favorable for a sale.

Closing Island Club - Indianapolis Acquisition: We are set to close in mid to late July and roll out our value add business plan immediately thereafter. We're currently 90% committed on the equity side of things, but if you have interest in partnering with us on this opportunity in the meantime don't hesitate to reach out while the opportunity is still open. Invest Now

Onboarding Director of Asset Management: Plans are underway to onboard an extremely talented, dynamic and experienced team member to lead our asset management division with a focus on protecting the interests of our investors via optimized asset performance, risk management, and leadership of the property management operations.

We are immensely grateful for your continued support and belief in our vision. While the market is changing rapidly, with the current challenges, opportunities are abound. We look forward to capturing them together with you.

Closing Thoughts

As we continue on this exciting journey, your insights and feedback are invaluable to us. We invite you to engage with us anytime. Together, we are not just growing an investment platform and enduring company; we are leading the way in Elevating Communities Together - with a focus on doing what's best for our residents, staff, and partners. Thank you for your trust and partnership.

Enjoy your June, stay safe, and we look forward to our continued success together.

Warm regards,

Tyler & Bryan

From the Desk of CF Capital: May Investor Report

Hello Friends and Partners,

The 150th running of the Kentucky Derby was quite the exciting photo finish, creating the most dramatic race in over 70 years for the heralded event. For folks from Louisville, the greatest 2 minutes in sports capped off a spectacular week of pageantry and fellowship for our team and families. We participated in some of the festivities throughout the week, enjoying each others' company and discussing opportunities and developing further our ever so important long term relationships with team members, partners, and vendors.

Aside from enjoying ourselves at Churchill Downs, we've had an extremely active month. We officially launched our latest opportunity, Island Club, in Indianapolis and are more than 75% full with limited slots remaining. While the market remains challenging, we believe this opportunity is extremely compelling and project outsized returns on this deal. Due diligence has been a success and revealed our expectations are in line with the potential of the asset, and we along with our management team expect even further upside after gaining detailed familiarity with the asset. Needless to say, we're excited! If you'd like to learn more about the deal or discuss your specific questions, please reach out while the opportunity is still available.

On the day to day front, we're excited to share that we're actively recruiting for a Director of Asset Management to join the CF Capital family. If you know someone with experience driving results for multifamily real estate in this capacity, we'd welcome the opportunity to connect with them and explore the possibility of this role together.

Apply Here

On the "greater good front," we were proud to have hosted and facilitated a "Financial Literacy for Kids" event at a school for under-privileged middle school kids in our community. The name of the event was "How to Become a Millionaire" and we covered financial literacy topics such as making budgeting fun and approachable, making more money, and leveraging the wonderful concept of compounding. We believe that giving the gift of prosperity is one of the most important gifts we can give, and were very gratified to have delivered this experience. We look forward to these children applying these learnings in their future and continuing to give back to our community and to others around the country in the future.

In summary, while we continue to strive to live life to the fullest, expand our existing and future relationships, we are continuing to acquire game changing multifamily investment opportunities, invest in our business, navigate day to day challenges, and give back to help make a massive difference for others. We're nowhere near perfect, but we appreciate the opportunity to continue to bring value to others around us in an exponential capacity. We welcome your continued and expanded partnership as we proceed forward! Reach out any time and let's discuss your goals.

In Partnership,

Tyler & Bryan