From the Desk of CF Capital: September Investor Report

Hello Friends and Investors,

We hope you and yours are doing well! Meanwhile, the fast and furious year of 2023 continues to roll on, with no sense of slowing down. The volatile news cycle, relatively turbulent economy, a presidential election cycle that's starting to take center stage and continued uncertainty in capital markets are creating some opportunities in our space and presenting a certain level of risk investors need to be aware of and appropriately mitigate. At CF Capital, we continue to plug away at relentlessly addressing current issues and remaining adaptable enough to capture attractive opportunities that are presenting themselves in light of current events. All the while, we continue to invest in our team members and find time to make special memories with our families.

Despite the headwinds in the current market, we are pleased to announce the recent closing of Elevate at Nulu, a 263 Unit Class B Value Add Investment in Louisville, KY in the dynamic submarket of Nulu! We are very appreciative of our partners for their trust and confidence in our team as we embark upon this new venture together. The current market dynamics created conditions for a very attractive investment at a meaningfully discounted price. We were very pleased to secure financing at a fixed rate for 5 years at 6.06% with Fannie Mae, a very attractive rate considering the current interest rate environment. Now the real work starts where we begin to execute the business plan. For investors who would still like to participate in this deal yet weren't able to get in before closing, there are a few remaining slots available for you. Reach out to us to inquire further; note that we would anticipate this door to be closed rather quickly, or within the next couple of weeks.

Aside from our everyday business pursuits, in August, Tyler and his family took a trip to one of their favorite places in the world in Northwest Montana. They checked off a goal off their list of summiting a mountain with the twins (even if it was via gondola ride!). They enjoyed hiking, biking and boating in the great Montana outdoors, and visited beautiful Glacier National Park twice, a place very special to their hearts. Bryan and his family closed out the summer over Labor Day weekend at Douglas Lake, TN having fun on the water boating, fishing, and spending time with extended family members. While the reach and responsibility of CF Capital continues to expand, our founders continue to remain committed to living a life of adventure and fun! We're thankful for our team's support while we recharge and retool from time to time to come back fully rearing with energy and enthusiasm prepared to solve problems and create value for our partners.

 

 

Morgan Wimberg recently celebrated her 1 year anniversary working with CF Capital as our Asset Management Associate. We are so proud of Morgan and her continued tenacity to help us optimize all of our investments through the execution of our property business plans and maximize NOI. To celebrate, we threw axes and reflected on all of her accomplishments of the last 12 months. She's just getting started, and we are very appreciative of the excellent work Morgan remains committed to doing on behalf of all of our investors! Our team is growing, and we would invite you to stay tuned as we're going to be announcing two new positions in the near future. A+ players only, of course!

As for what we're seeing in the market in terms of new opportunities, time will tell. Having just closed on the acquisition of Elevate at Nulu, we're focused on beginning the execution of its business plan to create some meaningful momentum in the deal. Our team will be beginning unit and exterior renovations immediately. We continue to renovate units (garnering rent premiums well above initial proformas, all the while) and optimize the financial performance of the rest of our properties as well. As new acquisition opportunities cross our plate, we continue to evaluate and will pursue opportunities that provide an asymmetrical risk/reward ratio, especially while this apparent "window of opportunity" remains where many buyers are inactive, and sellers are willing to sell at a discount.

Here's to wishing you and yours a happy and prosperous beginning to the Fall season! Don't hesitate to reach out to discuss your real estate investment objectives, catch up, or ask any questions.

In Partnership,

Tyler & Bryan

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.

Work Over Time: Let’s Talk About Asset Management…

“The role of the musician is to go from concept to full execution. Put another way, it's to go from understanding the content of something to really learning how to communicate it and make sure it's well-received and lives in somebody else.”  This quote by the famous musician, Yo-Yo Ma, resonates deeply with our team at CF Capital.

Though we do not think of ourselves as musicians nor are we particularly adept at creating original music, we do believe Yo-Yo Ma makes a point that is applicable to aspects of what we do everyday with CF Capital.  

Over the past weeks we have been speaking to many parts of our philosophy and process.  We discussed how we go from an idea to planning.  And how we go from planning to execution.  Although we believe our investment process is extremely important to setting the stage for a successful investment, ultimately none of it matters if we do not execute.

“Having a vision for what you want is not enough. Vision without execution is hallucination.” -Thomas A. Edison

Today we will discuss asset management, or what we would like to think of as the methods of execution.   What do we mean by this?  Simply stated, it is putting our business plan to action to deliver results for our investors, the community, and our residents.

At a fundamental level, outstanding asset management is effective management and leadership of our property management team. Asset management is also about communicating to help property managers make excellent decisions, while holding them accountable in an effort for all invested parties to achieve their goals.

At the end of the day, our goal has two explicit parts: 1) to protect investor capital; and 2) raising the value of the project, whether it is physically and/or operationally.

In order to achieve those goals we must “see things through” with a highly detailed lense with our property management team that is on the ground, taking care of the day-to-day with the property.  Our business plan is our guide for asset management.  Inside our ordinary expectations, we execute based on our business plan. 

However, if we have learned anything from real estate and in life, it is rare to have exact circumstances occur as planned.  Therefore, asset management isn’t just about managing the ordinary, it is also about recognizing problems and course-correcting when necessary.  Execution can only be successful if we manage the unforeseen things that occur within our communities, in addition to ensuring the collaborative team effort to accomplish our stated objectives.

We always “expect the unexpected,” and are ready to adapt when we are faced with a challenge.  This mindset serves us well as it prepares us for resiliency and ultimate success. 

The CF Capital team does everything to ensure that we are holding our own team accountable, acting as leaders, while focusing on the performance metrics in a detailed capacity.   The metrics reveal the effectiveness of our methods and show if we are gaining traction with income and expenses -- whether it is leasing or managing expenses or other income. We track key performance indicators, or KPIs, closely to ensure our efforts are ultimately being realized as results as expected in our business plan.

Another key part of asset management is implementing the capital expenditure plan as formulated in our business plan.

If we planned to make programmatic improvements to plumbing, for example, our team must coordinate with our property management company, subcontractors in the market, and the maintenance staff to ensure the successful implementation of this investment.  We also must make sure that the plumbing installation project goes as smoothly as possible with minimal cost and time overruns, and minimizing resident disruption.  If a problem comes up, we must provide guidance in the best way to solve the problem and further give our team the tools to make the best time sensitive decisions where appropriate.

For the sake of simplicity, we want our readers to take away that asset management may seem quite simple, but there are many variables that come into play. Our team is dedicated to being detailed, diligent and focused to execute in the long run through asset management. We believe this persistence offers peace of mind to our investors, employees, and residents of the communities in which we invest. 

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Interested in partnering with us? Join our investors list here. 

Action Control: Let’s Talk About Our Business Plan…

Last week we received an email from one of our loyal followers: 

“I really enjoy all of your blog posts.  They have been very informative, and I am fascinated by your firm’s philosophy and process, which is why I am reaching out to you guys.  It appears that your business plan is one of the key components to your ‘secret sauce.’  What is the business plan?  Could you tell us readers a bit more about it?”

These are the types of emails we love -- we are both grateful and appreciative.  We are also happy that our audience is finding value in our transparency.

So today we will address our reader’s request.  Let’s walk through examples of how we formulate CF Capital’s business plans.

At the basic level, a business plan is created for each acquisition opportunity in order for us to organize our thoughts and formulate how we will implement our value add strategy.

An exceptional business plan is a function of the hard work done in underwriting and due diligence.  You can kind of think of it as “the cherry on top” of the investment process sundae.  The business plan wouldn’t be any good without the necessary and rich base.

Our deep work allows us to see what is happening with current operations at the property.  This enables us to identify where opportunities can be maximized and where there is room for improvement.  We then think about the desired outcomes from an income perspective as well as an expense perspective.

From this point on is where we have the most fun (or at least we think it’s fun).

The next steps are all about how creative and prudent we can be in our approach to adding value.  Ultimately, we are trying to find ways to increase our cash flow and maximize the returns for our investors.

Each property is different and is essentially it’s own independent business.  Therefore, every business plan will be unique and different.  Some properties may have more problems on the income side, which would mean constructing a plan to capture the benefits from increasing the property’s income.  Other properties have major expense problems, which create an opportunity for us to add value in reducing certain expense areas.

In one property we might plan to reduce expenses by streamlining the plumbing, heating, and cooling.  Additionally, we might be able to reduce maintenance costs by making improvements to the property (i.e. capital expenditures).

With that same property, we would also aim to add value on the income side by improving utilities as well as adding other fees, services, and different rental options.

What do we mean by this?  By adding pet fees, clubhouse rental fees, appliance rental fees, gym membership fees, concierge services, laundry services, and cleaning services, our investment property will be able to increase its total income.

Introspection and thoughtfulness are essential to crafting a sound business plan.  If we aren’t doing things like looking out at reference points in the marketplace, we won’t be able to tell that our business plan is relevant.  

We take into account things like our competitor’s rent, rent comps, or other rental prices in the same submarket.  Maybe a submarket suggests that a higher value type of property would be compensated from a higher rent perspective.  Figuring out the appropriate rental price level and tenant demands is our objective.

We also think about the type of tenant base we want.  Then we want to attract them.

“Get closer than ever to your customers. So close, in fact, that you tell them what they need well before they realize it themselves.” - Steve Jobs

To implement that Steve Jobs philosophy, we believe it takes deep research and thought into their wants, needs, and desires.  If the ideal tenant enjoys amenities like laundry service, we have to figure out how much they enjoy it.  Also, how much are they willing to pay for it?

With all that said, our business plan does factor in many variables.  In each unique case, we take a creative approach to identify the income and expense opportunities, and create a plan to capture any monetary benefits from adding value in those specific areas.

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Interested in partnering with us? Join our investors list here.