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Levine Capital – September Update

 As summer gives way, we hope you are poised to enjoy a safe and joyful fall!

Over the past month, the speed of recovery has continued to vary considerably across U.S. submarkets, and local socio-economic dynamics are becoming an increasingly notable factor when making real estate investment decisions.

From a broader standpoint, we feel strongly that secondary markets will continue to outperform metropolitan hubs as the shifts in tenant demand affected by COVID-19 reinforce the gradual population trends towards more spacious, affordable suburbs and secondary cities. Our co-investments with TCS Anika Homes are well-positioned to benefit from this ever-increasing demand for price-accessible Single-Family Rental (SFR) houses and we are excited about more opportunities in store for us in the SFR sector.

WHAT’S DEVELOPING IN COMMERCIAL REAL ESTATE

While COVID-19 case rate trajectories continue to fluctuate month to month, there continues to be both optimism and pessimism at play. National Real Estate Investor’s recent survey suggests that nearly 60% of respondents expect high net worth individuals to increase their allocations to commercial real estate over the next 12 months—a roughly 7% increase relative to the December 2019 response and the highest proportion in the five-year history of the survey. On the other hand, adding to the uncertainty are renewed fears of another surge in coronavirus cases this fall and winter, as we are observing in other parts of the globe, such as Europe.

Although the real estate sector overall is benefiting from stock market volatility and the Federal Reserve’s commitment to suppress interest rates through 2023, the ongoing uncertainty emphasizes the importance of a more in-depth level of due diligence when evaluating potential opportunities. The underlying socioeconomic dynamics of discrete submarkets are more crucial now than ever when making real estate investment decisions. Industry composition appears to play a pivotal role in a region’s recovery path, and markets focused more on manufacturing, logistics, and construction seem to be more resilient than local economies more heavily reliant on service industries. A buzzword that gained a lot of attention lately is called a “K-shaped” recovery, which symbolizes an uneven economic rebound among socioeconomic classes. In other words, those at the top tend to bounce back far more quickly than the others in the middle and below. Unfortunately, the disadvantaged groups’ economic situation sometimes worsens further.

Aside from underlying market specifics, immediate increased demand for varying types of commercial real estate is divergent as well. In particular, there has been pronounced investor interest in single-family rental properties and similar housing preferences, which reflect the renewed desire for more spaced out limited-contact accommodations. Whether they are focused on rebalancing investment portfolios or putting new capital to work, investors (both institutional and retail) have grown more discerning as the crisis doesn’t kindly parse opportunities from challenges or threats.

Fund Highlights

We closed on TCS Anika Homes Fund III to buy approximately 55-57 single-family homes.

TCS Anika Homes is currently building out a model for a foreign family office looking to deploy a significant amount of capital with them. The good news is that they will save us some room for their next Fund, which continues to entail our educational platform!

Aggregation Fund has increased the monthly coupon distribution to 11-12% with a 20.5% target annual return over a 5 year period!

Please keep in mind that we’ve raised the minimum investment to $50,000. That being said, we are seeing an influx of institutional investors seeking our guidance to help structure and deploy their capital and we will continue to allow high net-worth investors to invest alongside us. The educational platform will remain in place, only with a larger denomination for entry.

Stay connected with us by subscribing to our LEARN INVEST GROW YouTube Channel where we publish a video once a week. The goal is to add value to the investor`s community with educational content and market updates.

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Sincerely,

Adam Levine

Managing Partner

Mobile: (908) 202-3574

Office: (732) 858-1758

Emailadam@levinecapital.com