As the world continues to work its way through the Covid – 19 pandemic, markets are beginning to remerge across the country, and in our case – New York City. The barren streets of Manhattan are slowly coming back to life, more stores and restaurants begin to reopen daily as we head towards the Fall. These are unforeseen times, times we hope we never again see in our lifetimes. Like all other markets, real estate and residential housing has and continues to be deeply affected.
That said, as a real estate business, while this is a new and unforeseen crisis – this is not the first one. Working in real estate for over twenty years in New York, I’ve seen several different crisis scenarios come to life, and the key has always been the same – don’t panic – stick to fundamentals – and look for opportunities as they will eventually arise.
We manage real estate investments so we can deliver high risk-adjusted returns across all market cycles. We are an active manager, working in the trenches – and its our job to make strategic moves that are consistent with what we see in the market. Understanding this and knowing how to navigate the market during times of crisis or a bear market are the key.
In today’s market, we’ve seen economic fundamentals deteriorate without much change in the corresponding price of real estate. At this point its hard to forecast the near future, as we don’t have a crystal ball to know exactly how this will play out, but we do understand the difference between price and value, and know what a good risk-adjusted return looks like. In any market, the best returns can be found where there is a market imbalance, and the pandemic is definitely creating opportunities.
Experience Matters
Our collective experience of acquiring, developing or operating more than a thousand apartment units enables us to invest in a way that mitigates risk. We invest alongside our investment partners on each deal. We understand how value is created, and we have the in-house capabilities to take a project from a concept to completion. We have executed over two dozen projects and have learned over the years the qualities of a good development or asset, and what is needed to make it successful, even when a crisis hits a project midway through construction.
The key to generating above market returns during an uncertain real estate market is having a pipeline of quality opportunities and experience in evaluating value. We have an established on the ground understanding of the markets we work in. To date, we have never realized a loss on an equity investment.
How Mortar’s Investments Are Doing in Today’s Market
While the real estate market may have been slow coming into the pandemic, it was nowhere near a bubble or even close to where the real estate market was in 2008. The 2008 recession was led by real estate because of excess lending in the market and loose fundamentals, but overall it seems that debt and equity providers have behaved responsibly over the past ten years to avoid another real estate bubble scenario. The point is, this year’s recession is likely to be much kinder on real estate than 2008.
On the asset management – or residential portfolio side of things, we are performing well in this unprecedented time, with monthly collections above 96% and occupancy stabilizing as we head into the Fall. Our focus on owning boutique multifamily buildings in growing markets has positioned us to better weather the downturn. Part of our recent success has been result of a campaign early into the shutdown, communicating with residents, working with residents and their concerns, and establishing a system to manage issues as they arose.