Multifamily housing has proven to be a sound investment. Historical trends show it has performed well in uncertainty, while leading indicators expect it to be a strong investment for years to come. To reap the many benefits of multifamily investing, it takes finding quality real estate opportunities, which is a highly competitive endeavor that requires significant expertise, capital, relationships and more.
At Origin, we’ve found deep market knowledge, diligent deal sourcing, meticulous underwriting and painstaking asset management have helped our deals weather all economic climates. We’ve pioneered innovations and efficiencies that have allowed us to be agile regardless of market conditions. But nothing can compensate for finding quality investment opportunities.
Three strategies have allowed us to maintain our deal flow across our two active Funds to find and secure properties with the best potential for high returns: “boots on the ground” market knowledge; inventive and rigorous data analysis; and flexibility in deal structure.
It sounds cliché but it could not be more accurate – real estate is a relationship business. Our acquisition team stays in close contact with developers, brokers, attorneys, general contractors, architects, property managers, lenders and title companies to get accurate local information. We live in our markets for a “boots on the ground” familiarity with local conditions that gives us a clear-eyed view of market fundamentals and undervalued properties. It also gives us an undeniable edge when it comes to sourcing off-market deals.
Thanks to our contacts and reputation, we are often invited to bid exclusively on properties or be part of a selective group of potential buyers. We typically source 50-70% of our deal pipeline off-market. These opportunities leverage our other strengths, while access to capital and the ability to close deals gives us a competitive advantage that makes sellers confident in transacting with us.
Proprietary Data Analysis and AI-Powered Machine Learning Database
Economic downturns and market corrections are inevitable in real estate investing. A clear understanding of market fundamentals allows a real estate manager to price assets appropriately. Over the years, we have continued to improve our underwriting models to assist in our evaluation of investment opportunities in an effort to find high-performing real estate investments.
After years of operating in high-growth markets, we have an exhaustive database that captures detail on a wide array of individual properties—including prices, leasing activity, cap rates and property characteristics such as square footage, amenity offerings, unit finish-levels, age and condition. This granular data allows us to make more precise valuations of individual properties and helps us gauge the stability of commercial real estate submarkets in specific metropolitan areas.
We also track new employment, wages, home values, rent growth and other workforce statistics. These broader indicators identify affordable and resilient markets that carry less risk to operating income. Multifamily rent disruption is less likely where employers are hiring or avoiding layoffs. Sectors with strong job creation should be associated with more stable multifamily property valuations and offer less risk of rent defaults.
Our deep and rigorous analysis of data has always benefited both the buy and sell-side of our portfolio: We structure deals that reward our risks and predict the optimal time to sell and take profits. There are also operational benefits as data analysis reveals outliers and superior performers.
We recently took our analysis to the next level, building a proprietary artificial intelligence-powered, machine learning database that, with predictive models, helps us understand the best submarkets to invest, validate acquisition choices and finetune forecasts. We use it to understand which markets have the potential for the most upside and to make decisions on when to sell an asset, resulting in greater returns for our investors.
Flexibility with Deal Structure
Real estate valuations are subject to economic forces and do change. In a changing real estate market, private equity gives us unusual flexibility to take different positions within the capital stack—the tiers of real estate financing that spread risk among multiple lenders and owners.
We’ve built our IncomePlus Fund in a way that allows us to mitigate risk and yield healthy returns during times of market uncertainty. During the COVID-19 pandemic, we looked for preferred equity opportunities, an ownership position that sits between common equity and mezzanine debt. Preferred equity investments are often a limited-term investment by design and is more protected than a common equity investment because it offers payments and return of our investment ahead of other partners. In a contracting market, preferred equity keeps investors’ cash at work with steady returns and less risk than common equity.
At other times, it makes more sense for our IncomePlus Fund to invest in common equity positions in core-plus opportunities because the stabilized assets have upside potential in certain economic conditions. We also allocate 20% of the IncomePlus Fund’s portfolio to common equity positions in build-to-core opportunities, which is ground up development of new assets that can transition to becoming core stabilized assets upon construction’s completion.
Because we have flexible capital and can invest across various parts of the capital stack, we are able to find unique opportunities in both up and down markets. The willingness to get creative on deal structures has earned us a reputation in the industry as a trusted partner who can execute on a variety of complex transactions.