From the Desk of CF Capital: November Investor Report

Hello Friends and Investors,

We hope you and yours are enjoying the season of autumn as we welcome the month of November. You may have found yourself in the hundreds of millions of Americans that welcomed this month with a significant cold snap, firmly cementing the transition to the fall season. The kids in our lives (and their parents, for that matter!) broke out their winter coats, hats and gloves and still had a blast for Halloween, nevertheless! We hope you did too.

In this month's investor report, we're excited to share what we've been up to and what we're seeing in the market in an effort to help our valued partners make more sense of the complexity of the current and projected marketplace.

Strengthening Partnerships in the Real Estate Capital of the World

First, in October, it was great to spend time in NYC, where we had the privilege of spending valuable time with some of CF Capital's important strategic partners (some of the most elite minds in our industry, nationwide), discussing the state of the market and strengthening our relationships for future opportunistic pursuits. We are excited about the opportunities that are emerging through these best in class collaborations and look forward to sharing more details in the coming months, to your benefit.

Market Updates: Residential Market Dynamics, Midwest Stability, War in the Middle East and Interest Rates

Multifamily real estate continues to be a resilient and attractive investment in today's ever-changing and in many cases turbulent economic landscape. Demand for quality apartments remains robust, driven by factors such as high single-family mortgage interest rates, rising costs of home ownership, steady population growth, and select job market expansion. As the chart below shows, the gap between homeownership and multifamily rents are at historic levels. This spread driven by increased mortgage rates coupled with the overall housing shortage are keeping demand for rental property strong.

CF Capital and our partners are actively invested in Kentucky and Indiana and are further pursuing growth in the Major MSAs of each state in addition to Cincinnati, OH, and in Nashville, TN. Depending on who you speak to, these markets would be considered the Midwest, while in many circles Kentucky would be considered the Southeast, and usually Tennessee is firmly considered Southeast. Regardless, the characteristics of most of the markets that we target (with the exception of Nashville), tend to follow Midwest trendlines. The Midwest, historically known for steady and attractive growth, remains strong and steady while some other regions of the country are seeing rental rate declines. The Midwest's healthy overall economic conditions, population stability, stable population growth, and continued rent and job growth make it a compelling destination for investment in otherwise volatile macroeconomic conditions. Recent reports of our target markets like Louisville, Indianapolis, and Cincinnati leading the nation in rent growth and salary expansion for 2023 highlights the region's position for long-term value, compelling us to continue to pursue attractive value-add multifamily opportunities to share with you.

Unless you live somewhere deep under a rock, you are well aware that in October, a brutal war in the Middle East broke out from the attack on innocent civilians in Israel. Our hearts go out to the many families impacted, and the many families that are being impacted in the conflict since the initial attack. Geopolitical concerns are on high alert across the world, impacting capital markets and anticipated market conditions. There are no certainties of how things will play out, but investors are on high alert as governments play the high-stakes chess game of incredibly complex circumstances that no doubt impact financial markets, investor sentiment, and the flow of capital.

Last week, the FOMC met and left interest rates unchanged, making it the second meeting in a row where the central bank has skipped a rate hike. Capital markets remain very volatile, influencing decisions related to capitalization, growth targets, and the broader investment landscape. Uncertainty remains, but a pause gives players like us more clarity and stability in the real estate market today for investors positioning for transactions. The recent jobs report showed a softening employment market, which caused treasuries to dip meaningfully as the market anticipates an overall weakening economy, signaling perhaps future dovish central bank behavior. While interest rates are not directly correlated to cap rates (ie. multifamily asset valuations), they are absolutely sensitive to them, and overall cash flow is certainly impacted. Time will show how the capital markets continue to make sense of the state of the market, after a dizzying last 20 or so months of interest rate hikes working their way through the system. We continue to believe this time of uncertainty remains a window of opportunity to secure attractive deals at discounts, while being properly capitalized for longer term hold periods.

Looking Towards 2024

As we look forward to 2024, we are closely following the significant wave of multifamily maturities coming due, comprising hundreds of millions of dollars worth of quality assets in our target markets that may be forced to transact at adjusted market level prices. The story of how this landscape will evolve, including strategies for recapitalization, refinancing, or asset disposition at potentially reduced valuations due to increased interest rates and cap rate expansion, is still unfolding. Time will tell, and flexibility remains our north star as we navigate these ever changin market dynamics.

Thank you for being an integral part of our community. We look forward to keeping you updated on the latest developments in the real estate market and opportunities to grow your wealth through real estate at CF Capital. If you have any questions, comments, or suggestions, please feel free to reach out to us.

Wishing you a prosperous November!

Your Trusted Real Estate Partners,

Tyler & Bryan

From the Desk of CF Capital: October Investor Report

Hello Friends and Investors,

We hope you and yours are well as we welcome the vibrant season of autumn. October is a time of change, and in the real estate investment landscape, change is the cornerstone of progress and growth. As we dive into this month's report, we're looking forward to sharing with you an update on the multifamily real estate market, a glimpse into CF Capital's recent endeavors, and an exciting announcement regarding our current analyst position recruitment.

Market Overview: Multifamily Real Estate Update

Multifamily real estate fundamentals in our target markets have remained dynamic and resilient despite the drastically evolving economic landscape. Demand for quality apartments in our markets continues to be robust, propelled by a range of factors, including high mortgage interest rates pushing people away from home purchases, population growth and job growth. In comparison, some higher cost of living markets across the country are seeing actual rent rate declines in today's marketplace. Our slow and steady markets continue to chug along.

Recent market "whiplash" from the fastest rate hiking cycle in history remains a significant headwind. Looking back, rates today are 5 times higher than where they were 18 months ago, an unprecedented sea change creating distress and potential opportunity for investors. Capital markets remain extremely volatile, influencing current operators' decision making for capitalization, growth targets and the resulting overall investment landscape. Looking ahead to 2024, there are reported to be hundreds of billions of dollars worth of multifamily debt coming due (comprised of hundreds of thousands of apartments across the country), and the story is still unfolding with regard to how the landscape will take shape regarding positioning to recapitalize, refinance, or dispose of assets at depressed pricing due to increased interest rates and cap rate expansion. Time will tell, and a lot will likely change, while we remain dialed in to protect investor capital and keep open options for flexibility as best as possible as the storm passes.

CF Capital Updates

At CF Capital, our team remains committed to delivering exceptional value and superior service to our investors. Over the past month, we finalized our partnership with JG2 to begin the process of bringing property management in-house to further align investors interests to the property management function. Over the course of the next 24 months, we will be leveraging JG2's outstanding team, systems, functions and expertise in property and construction management as we work together to build out the same within CF Capital's four walls. Our ongoing projects are progressing, and we're focused on driving operational efficiencies and enhancing the overall value of our portfolio. Our dedicated team works tirelessly to ensure that our investors' interests are at the forefront of every decision we make.

Also, during September we closed on Elevate at Nulu, and have been very pleased with an extremely smooth takeover. Our property management partner for this asset, BH Management, shared that from their perspective it has been one of the smoothest takeovers they've seen even from the perspective of over 100,000 units under management. Furthermore, we're seeing immediate organic rent growth already begin to exceed our proforma on renewals and make readies. This is great news for our investors as renovations begin to ramp up, as we anticipate continued positive momentum. If you'd like to join us in this deal, there's still a couple of slots available!

Lastly, we continue to identify and assess potential multifamily acquisitions that offer compelling value and align with our investment thesis. We're seeing more compelling opportunities than we've seen in quite some time, and anticipate that trend continuing as capital markets continue to be volatile. With a long term perspective, such investors are positioned well to capitalize on the state of the market.

Exciting Announcement: Analyst Position Recruitment

We're thrilled to announce that CF Capital is actively recruiting for the position of Analyst to join our team. This role offers a unique opportunity for driven and experienced individuals to join a fast paced and high performing team of real estate professionals. If you or someone you know is passionate about real estate analysis, possesses strong analytical skills, and is eager to take their career to the next level, we invite you to explore this exciting opportunity by visiting our careers page here.

Thank you for being an integral part of our community. We look forward to keeping you updated with the latest developments in the real estate market and our journey at CF Capital. If you have any questions, comments, or suggestions, please feel free to reach out to us.

Wishing you a prosperous October!

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.

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

From the Desk of CF Capital: March Investor Report

Hello Friends and Investors,

I hope you're doing well and ready to kick off spring time! All-around happenings remain productive for CF Capital as we navigate a hyper-active environment in the broader economy. It's certainly an important time to be informed of the many cross winds that are blowing, but also a great time to check in to understand how your mindset is being conditioned by the inputs you're allowing in. Our team with CF Capital is completely dialed in to understand the broader trends to anticipate and strategize around within our current and growing portfolio, and we remain positively focused on healthy growth amidst a time when many seem to be focusing on solely negative conditions.

In early February, we attended the annual NMHC Conference in Las Vegas, and met with the industry's best and brightest to strategize in 2023 and beyond growth strategies, as well as contingency plans for navigating uncertain times in the multifamily space. Across a couple days, we met with 40+ strategic partners, brokers and debt providers and walked away with optimism, strengthened relationships, and many new investment opportunities to evaluate.

Mid February, we began our "State of the Investment" Webinars series for all active deals in our portfolio, to share with our current investors where we are relative to our plan and projections. We received overwhelmingly positive feedback from investors about this communication tool, and hearing directly from us on the details of how the business plan is performing, and how that impacts their investment with us. We're encouraged to continue to strengthen our relationship with our valued investors through this medium, as well as best in class communications and execution.

We're continuing our hyper focused approach on portfolio management, and in particular leading our team in the standard of outperforming industry standards on collections, leasing, and renewals. While in Q4 we experienced somewhat of a slowdown in new leasing (which isn't abnormal, due to seasonality), we're very pleased with a substantial uptick in traffic in Q1. Beyond that, our teams at each asset have been shining in particular on collections (averaging over 95% across the portfolio) and renewals (averaging 10% across the portfolio), along with very positive trends on a month over month basis. These fundamentals remain our hyper focus, in addition to attracting and retaining the right talent on our sites (we just hired 3 new staff members across the portfolio) and pushing the ball forward on major capital expenditure projects (exterior projects including parking lots, electrical conversions, amenity conversions and ongoing interior unit renovations). Needless to say, our team has been working hard to deliver for our investors.

On the acquisitions front, our pipeline is growing and we're evaluating 12-16 deals that meet our acquisition criteria every month. We've got a couple deals right now that we're targeting closely, and are patiently aggressive towards securing our next opportunity for your consideration. Conventional wisdom in our space at the moment remains that the second half of 2023 will be highly compelling with more forced sellers than at any time over the past several years. We will absolutely keep you informed as this develops. For our acquisitions team, we're planning to hire an ambitious, high upside professional with character and energy to help us grow the CF Capital portfolio across the region in the very near future. A job posting will be coming soon, but if you are or know anyone who would be interested to discuss this opportunity, please reach out or make an introduction. This will be a life changing opportunity for the right talented individual.

This month, we're traveling out west once more to attend the Best Ever Conference for Commercial Real Estate Investors in Salt Lake City, UT. In addition to strengthening our current strategic partnerships, we're looking forward to expanding our network as opportunities in this next cycle begin to unfold. Tyler will be speaking on "Enhancing Your ROI by Elevating Communities Together," a concept that's near and dear to our hearts and that has been a separator for CF Capital. If you'll be attending the conference, please let us know and we'd love to make plans to get together in person.

In Partnership,
Tyler & Bryan

PS. If you'll be in or around Louisville in late March, we'd love to invite you to attend our next event: The 2023 Real Estate Investment Landscape Moderated Panel & Event sponsored by LDG Development. Register for the event.

From the Desk of CF Capital: January Investor Report

So it's a new year. Does that mean it's a new market? Time will tell. In 2022, the historic speed at which the Federal Reserve raised rates led to tremendous market disarray, and a disconnect between buyers and sellers in our multifamily space for many months. Generally, commercial real estate markets are slow moving, and this type of rapid change to a critical factor in real estate investing, interest rates, were not fully integrated throughout the markets for quite some time. We anticipate that the calendar change to 2023 will more solidly imprint in sellers' minds that the previous market cycle is now truly history, and we're now operating in a completely new landscape. Further, it is anticipated that market distress is on the horizon, with a meaningful percentage of loans expiring this year on deals that may not be candidates for the needed proceeds on a refinance or may not hit investment metrics on a sale. We continue to scour the market for quality assets - we're mainly focused on B-Class assets at this stage of the market cycle - with a compelling story. While we were very active in December pursuing new investments, no new deals were officially secured (while two came very close) that were appropriate to acquire and offer to you for investment consideration at this time. We are optimistic that Q1 2023 will be more ripe with the right opportunities for your consideration.

We also remain hyper-focused on optimizing our current portfolio during this time. We're mid value-add on several assets right now, and a significant amount of our team's focus is on ensuring we're performing to projections. With a myriad of market headwinds, we're doubling our efforts and focused on results. After all, we're in the business of protecting and growing partner capital, because our relationship with our investors is for the long-haul.

To start off the new year, we've got some exciting things happening on the horizon. For one, Bryan and Tyler will be attending the annual NMHC in Las Vegas at the end of January/first of February. If you'll be attending and we have not yet scheduled a time to meet, please reach out to Rachael via email at [email protected].

Don't hesitate to reach out to discuss your goals for your real estate investments for 2023 and beyond. We always appreciate the opportunity to connect with you directly to learn how we can support you further.

Here's to wishing you a wonderful start to 2023!

In Partnership,

Tyler & Bryan

From the Desk of CF Capital: December Investor Report

Hello Friends and Investors,

The holiday season is officially upon us, and the federal reserve continues their march forward on their fight against inflation. Our team at CF Capital has been in the spirit of giving by committing time to serve in our community and we've been hyper-focused on up-leveling our asset & property management teams in an effort to optimize the fundamentals of our investments as we navigate this market cycle.

Ahead of the December FOMC meeting next week, markets anticipate another hike, yet in a slightly reduced capacity from the November and four preceding months’ counterparts (all of which saw a 75 BPS increase). Recent comments from Federal Reserve Chairman Jerome Powell noted that “Despite some promising developments, we have a long way to go in restoring price stability." He indicated that policy moves such as interest rate increases and the reduction of the Fed’s bond holdings generally take time to make their way through the system. “Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

Interest rates and inflation have been the central theme of 2022, and they continue to have a tremendous impact on the multifamily real estate investment market, and most assets across the landscape for that matter. No one can truly predict where things are headed in 2023, but thus far, we've seen a seismic shift from a historic sellers market, to a market that is beginning to favor buyers. Still, we're seeing ROI expectations diminish as a result of higher costs of financing, but the few deals that are actually trading are trading for substantial discounts (in some cases 15%+ less than two quarters ago, an intriguing proposition in reduced going in basis for long term investors like us). We're anticipating some further runway in corrected values as we enter 2023, and are optimistic for the resulting acquisition opportunities on the horizon. Deals we're targeting are being projected as longer term holds (ie. 7-10 years) in an effort to optimize fixed rate debt and weather any impending economic storm. It's more important than ever to be prudent in underwriting and stress test our acquisitions, which is exactly what we're doing. To date, we've completed a deep-dive underwrite on 170 deals, and offered on 55 deals at where we feel returns are appropriate commensurate to the risk profile of the asset. We've closed 2 deals in an otherwise tumultuous macro environment in 2022, and are looking to acquire somewhere in the ballpark of 4-6 deals in 2023.

Aside from the acquisition trail, in asset management we have been focusing on the fundamentals of maximizing NOI in all of our assets through leasing, collections, and expense management. All the while our substantial renovation projects continued across the portfolio.

Outside of the blocking and tackling of the day-to-day business, we welcomed a new Executive Assistant in Rachael Chapman, a wonderful talent with a background in the Air Force and administration in the medical field. We also were able to lend a "day of service" the day before Thanksgiving supporting prep for a meal that fed approximately 600 homeless people in the Louisville area.

Lastly, some of our team had the pleasure of attending the annual March of Dimes Commercial Real Estate Achievement Award (REACH) Breakfast Banquet at Churchill Downs, supporting families of premature babies, a cause especially near and dear to Tyler and his family after their experience in the NICU earlier this year.

In summary, while the December month seems to get busier and busier each year, we would like to challenge everyone to take time to pause and remember the reason for the season. Express your gratitude for all the good things in your life. Take a moment to help out someone else in need. As we continue to forge greater prosperity in our lives as investors, it is our duty to pay it forward to others and make our world a better place. Instead of complaining that "they" aren't doing what you think should be done in the world, take it upon yourself to be that leader and the change that you'd like to see.

Happy Holidays and Merry Christmas from all of us at CF Capital and thank you for being a part of our community!

In Partnership,

Tyler & Bryan

P.S. 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: November 2022 Investor Report

Dear Friends and Investors,

We hope you're doing well and having a wonderful beginning to your November. Our CF Capital family has settled into our new Downtown Louisville Office, our families had an eventful Halloween, and we've been productive on the asset management and acquisitions fronts. Tyler shared a Halloween Horror Story on the highly acclaimed "Real Estate Guys Radio" Program, and you won't want to miss it. (Listen to the podcast on Apple Podcast or on Spotify.

As of October, upon returning from the phenomenal New Orleans Investment Conference, we finally settled into our new space on Main Street in Downtown Louisville! We'd love to host you the next time you're in town, whether you're in to enjoy the world-famous bourbon trail, check out a world-class horse race, or get onsite to some of our collectively owned properties in the area. We're always welcoming you with open arms to come say hello, and have enjoyed hosting several investors over the recent months.

On the business front, we've been investing heavily into the execution of our investment business plans at our current communities via detailed asset management, working with our on-site and regional teams in an effort to exceed our property goals for the quarter and for the year. On the renovation side, we're currently investing over $7mm in capital expenditures across our portfolio - in amenity enhancements, unit renovations, and exterior improvements. This past month, we repaved and re-striped two of our most recent acquisitions' parking lots, overhauled the landscaping and installed new on-site signage. Our rehab teams are busy renovating dozens of units each month, and our leasing teams are busy securing qualified residents at premium rental rates. We're focusing on driving occupancy, revenue and optimizing net operating income (NOI).

On the acquisitions side, we're very active in the market making a healthy amount of offers on deals; we're seeing some more attractive opportunities than we have in the past few years. The recent market turmoil is starting to shake loose more compelling deals, and we're anticipating our next opportunity for you to invest with us to be coming soon. While the cost of debt has substantially risen in recent months, the resulting market dynamics are more compelling than we've seen in a long time; it's now just a matter of putting the Rubik’s Cube of the capital stack together in a manner that allows us to amplify returns, protect capital, and optimize our investments. As you know, we remain picky, patient and prudent, and when we secure an acquisition, it's passed the rigorous standards that we have set. Stay tuned, and we hope to be announcing the next new deal soon.

In Partnership,

Tyler & Bryan