Dear Investors and Friends,
We are pleased to share Alpha Insights, our new quarterly newsletter. The purpose of this newsletter is to stay in touch with our members and prospective investors more frequently, providing valuable insights and information on economics, commercial real estate market conditions (both macro and micro), varying asset classes, and updates on our portfolio and our company. We will share these timely insights here on a quarterly basis.
In this first edition, we are providing a discussion on the broader commercial real estate landscape and its impact on the Alpha Investing investment strategy. We are also providing a brief update on our portfolio, including recent transactions, and an important update on the Alpha Investing leadership team.
The Current Commercial Real Estate Landscape
The U.S. economy remains healthy and shows signs of continuing its 108+ month expansionary period, although the pace of growth is projected to decelerate due to rising interest rates and a tight labor market.
Commercial real estate valuations have risen significantly in the current cycle but are starting to slow in some markets. Sustained economic growth, healthy job creation, robust employment levels, and high business and consumer confidence are all positive points. Still, rent growth is decelerating and vacancies, which have reached record lows with little room for further improvement, are on the rise.
When evaluating investment opportunities, Alpha Investing focuses on asset fundamentals and looks for quality properties in the hands of the “wrong owners.” We seek solvable physical and operational issues that our sponsor partners can improve, conservative capital structures, and we guard against the downside, maintaining focus on risk-adjusted returns relative to current economic or market conditions.
In the current environment, our preferred asset classes include Multifamily, Self Storage, Manufactured Homes, Senior Living, and Student Housing. Each has a variety of positive attributes but, generally speaking, continued need-based demand is a characteristic they share.
We will also evaluate opportunities in different asset classes as dynamics continue to shift and as we move through a maturing stage of the economy. Regardless of the asset class, Alpha Investing will seek to provide investment opportunities that focus on asset fundamentals, active value creation, and downside protection.
The Alpha Investing Portfolio
To date, Alpha Investing has invested in 31 properties across the United States, as well as a commercial real estate debt fund. The total acquisition value of the 31 properties in our portfolio is ~$823.9 million.
STUDENT HOUSING ACQUISITION
College Station, Texas
- 380 unit/864 bed purpose-built student housing property, serving the Texas A&M student housing market.
- Experienced student housing operator with over 48,000 beds under management across 65 college markets.
- Strong university enrollment growth: Texas A&M is the third largest university in the country with over 62,000 students. Enrollment has increased by 15,000 (34%) since 2007.
- Conservative capital structure
Silicon Valley, California
- 143-unit multifamily property located in San Jose, CA, the capital of Silicon Valley.
- Strong local economy anchored by a booming tech industry. The property is located 2 miles away from Google’s planned San Jose Tech Village, a major development that is expected to add 6 million to 8 million square feet of offices. Adobe and Apple are also expanding in San Jose.
- San Jose is the most expensive housing market in the country, with average home prices increasing by 22.7% over the last year, pushing home ownership out of reach for many individuals and further necessitating the need to rent.
- Budgeted $1.75 million interior and exterior renovation plan is projected to generate a 20% ROI.
In addition to these recent investments, two properties in Alpha Investing’s portfolio had refinances during Q2 2018. A multifamily investment in Mesa, AZ, acquired in November of 2015, returned 64.1% of capital to Alpha Investors after ~30 months of ownership. In addition, a multifamily investment in Bremerton, WA, acquired in December of 2016, returned 34.1% of capital after ~18 months of ownership.
These refinances reflect substantial appreciation in the value of each property, and in both cases, Alpha Investors have maintained their same ownership interest in the investment, and will continue to receive distributions from the property.
Alpha Investing Leadership
During the second quarter of 2018, we added three new key members of the Alpha Investing leadership team.
Anne Lin joined the firm as our new Vice President of Underwriting, AdaPia d’Errico joined the firm as our Vice President of Strategy and Todd Friedenberg joined the firm as our Vice President of Commercial Real Estate.
Anne and AdaPia have both joined in a full-time capacity while Todd has joined in a part-time capacity. Their contributions will be fundamental to the platform, from sourcing and evaluating deals to enhancing the investor experience as we expand and grow Alpha Investing’s private capital network.
To read more about each of them, please visit the leadership page.