COVID: A Window of Opportunity
Mission Capital Fund I, LLC (the “Company” or the “Fund”) was formed for the purpose of acquiring and managing multi-family real estate assets. The Company will seek to acquire and manage real estate assets with the intention of providing participating investors with a real estate focused investment opportunity that combines income, principal investment growth, and elements of capital preservation. The Fund is managed by Mission Capital, LLC (“MC” or the “Fund Manager”), a California company formed in 2017 that specializes in real estate asset management, positioning, and maintenance to maximize the value and return of real estate assets. The Fund is managed by three highly experienced real estate and finance professionals.
The Fund’s primary focus is creating and maintaining investor wealth through local alternative real estate investment strategies, specifically targeting value-add opportunities in Class C+ properties at a unique moment in the economic cycle. Mission Capital is positioned to take advantage of the most important phases of an economic cycle: firstly, a window for unique purchasing opportunities due to a COVID-induced recession that has led to overleveraged property ownership and temporary reductions in economic occupancy; and secondly, investment growth due to a possible recovery spurred by mass vaccine distribution and a projected US and global economic recovery.
These two phases provide opportunities for lower-than market purchase prices, cosmetic and operational repositioning and high potential property value growth. CBRE’s economic advisors suggest “…the multifamily market will reach its bottom in the fourth quarter of 2020 and begin recovery in the first quarter of 2021… with pent up demand bursting in early 2021.” (CBRE: Multifamily Market Expected to Recover in Two Years”).
The Federal Reserve Bank of Philadelphia Survey of Professional Forecasters conveyed that real GDP growth over the next several quarters will continue, though at a lower-than-expected rate. However, further out, forecasters predict unemployment will decrease from its current rate of 8.2% to only 4.6% in 2023. As mentioned previously, CBRE’s economic advisors suggest “…the multifamily market will reach its bottom in the fourth quarter of 2020 and begin recovery in the first quarter of 2021… with pent up demand bursting in early 2021.” (CBRE: Multifamily Market Expected to Recover in two years”). Further supporting this framework includes other economic data indicating that millions are having difficulty paying rent, including an 11.5 million adults in rental housing – nearly in 1 in 6 adult renters – not caught up on rent in late October 2020. The management team believes that this delinquency rate, while distressing for those affected, nonetheless opens an opportunity to create favorable valuation based on lower economic occupancy.
The situation has led to “migration to suburbs and outlying towns… forcing rent up in those areas. With lower property prices in those regions and new rising demand from homebuyers and renters, the rent revenue outlook is good… Why is rental property still a hot investment sector? Primarily, it’s all driven by an improving economy in to 2021 and a strong lack of rentable housing… driving rent prices higher.” (The US Rental Property Market Outlook, ManageCasa, October 13, 2020).
The management team’s collective abilities provide an advantage over investing individually by allowing the Fund to quickly and efficiently address any real estate acquisition and management issues. The Fund’s ability to invest with aggregated capital also provides greatly enhanced negotiation leverage as the Fund can close acquisitions quickly and without the typical financing delays encountered with other purchasers that require institutional financing to close on a property. Since the Fund’s primary managers are directly involved in the placement of investment funds into select real estate assets, we can manage our investments more actively than large institutional investors. By investing in a Fund with experienced and specialized management, investors are freed from the complexities and time required for individual property ownership.
Our current offering (Fund I) operates as a hybrid real estate investment fund with a certain portion of allocated capital being utilized for shorter term opportunities and the balance for acquisitions that will mature over a five year period.