Markets | Finance Explained | Insights - 2nd Edition

After years of battling high interest rates and compressed valuations, private real estate is showing its first genuine signs of life. PwC's latest survey reveals that 65% of real estate participants believe profitability will be good to excellent in 2025—a dramatic jump from just 41% who felt that way in 2024.

What’s changed? Sellers are accepting reality. And prices are coming into line with value.

We’re seeing strong activity in multiple asset classes, and are particularly fond of:

Industrial: E-commerce logistics, AI driven data center demand, and near-shoring.

Multifamily & Build to Rent: Driven by supply constraint, and high interest rates + high home prices keeping many buyers out of the market.

Why this matters: After nearly three years of uncertainty, institutional capital is finding its footing again. Institutions (think endowments, pension funds, large PE firms) tend to be conservative and are ok with lower returns and lower risk. When they’re jumping back in, it’s a very positive sign that value is emerging.

"We'll do what we need to do to keep inflation under control."

The fed is famous for using a lot of words to say very little. Markets rise and fall based on speculation about what Jerome Powell will say.

One news source even said "America’s economic future is at stake.” It may be, but the simple fact is it’s not going to be decided by a 25 base point change.

Reality check: a 25bps rate cut will have little to no impact on your wealth or investment decisions.

"The big money is not in the buying and selling, but in the waiting." - Charlie Munger

So much “investing” today is really just speculating, or gambling.

And the majority of financial services companies make money based on that gambling activity.

Take Robinhood; who just reached a $100,000,000,000 valuation.

Their entire revenue stream is made up of fees on buying & selling, and margin lending: lending money to users to buy and sell, on which they make more fees.

No judgment here, but trading is an occupation, hobby, or side hustle, not an investing strategy.

Patience is the core investing virtue. And the foundation of patience is confidence.

Munger was the proponent of wonderful businesses at fair prices, and holding them for a long time. He was the architect behind Buffett moving from buying “cigar butts” (cheap companies that were dying on the vine, but had some value left to extract) to companies like Geico, Sees Candies, American Express, Netjets, etc…

Munger & Buffett were so confident in the strength of those companies, that patience was a natural side effect, and market volatility was easy to endure.

Many private equity companies were unable to sit on the sidelines over the last few years and bought at the height of the market, overpaying and over leveraging with risky debt. Many of those assets are now underwater and generating negative cash flow. They’ve lost investor capital, and lost investor confidence, so they’re struggling to raise money.

This is unfortunate, because as noted in the Signal section, value is back on the table. One of our operating partners, a top 10 multifamily group, had the patience to sit out the last few years of overpriced assets and overbuilt markets. Over the last 12 months, they’ve snapped up nearly $500M in assets, at great valuations, and we’ll conservatively achieve 15%+ returns for our investors in these projects.

If you want extraordinary returns, you need extraordinary patience. Patience is much easier when you’re confident in the value of your investment. The market rewards those who can wait.

Building on last week's foundation, let's dive deeper into how cap rates actually work in the real world of real estate investing.

Understanding cap rates isn't just academic—it's the foundation for evaluating whether a real estate investment makes sense in your portfolio.

To read part two, click here: What Actually IS a Cap Rate?

"Controlling your time is the highest dividend money pays. The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays." - ‘The Psychology of Money’

A favorite measure of wealth: the number of days I can go without having to do something I don't want to do, because you need the money.

Maybe better said: wealth is the ability to say no.

Investing well matters, because it gives you more control over your most valuable resource.

Find out who are, what we do differently, and why our we only work with the top 1% of private equity sponsors and operators to put investors first. Always.

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