San Diego, CA – July 17, 2024 – First we would like to thank all of you who traveled and spent time at our open house in San Diego at Equity Street Capital HQ.
We look forward to hosting more open houses across the country for our investor partners and will share new dates for these opportunities once they are confirmed.
Below is our quarterly update on Equity Street Capital’s activities for the second quarter and outlook for the remainder of 2024. More detailed information on specific assets can be found in our Quarterly Reports on the Equity Street Capital Investor Portal.
Acquisitions and Dispositions
During the second quarter we successfully closed on the acquisition of Johns Creek Town Center, a 303,297 square-foot, open air retail shopping center located in one of the best sub markets of Atlanta, Georgia. The asset is anchored by major retailers including HomeGoods, Sprouts, Kohl’s, Ulta Beauty, Market by Macy’s, and PetSmart, and is 99% occupied at acquisition.
Additionally, we officially sold our multifamily property outside Austin, Texas, Oaks on Marketplace, for a profit. This 254-unit, Class-A property, was originally acquired in May 2019 for $36.2M.
A second Class-A asset in the same investment entity, Northpoint Villas in Fort Worth, Texas, is in escrow and is expected to close at the end of August. This 276 unit multifamily property was acquired in May 2019. These two property investments will result in a profitable outcome and successful business plan execution. After the August closing we will share a case study and walk through the acquisition, management, and liquidation of these two properties.
We will be updating on an individual basis the progress of specific business plans within your quarterly reports related to upcoming refinances and sales.
Inflation & Fed Update
Last week, the Labor Department’s consumer-price index (CPI), a measure of goods and services costs across the economy, cooled for the third consecutive month, dropping the year-over-year inflation rate to 3% – the lowest since June 2023. Inflation has now fallen dramatically from its peak of 9.1% in 2022.
With inflation moving in a downward direction, the Federal Reserve appears to be shifting their attention towards the labor market. Federal Reserve Chairman Jerome Powell told lawmakers last week that the U.S. is “no longer an overheated economy” with a job market that has cooled from its pandemic-era extremes. Chairman Powell noted that “in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face.” Leaving monetary policy too tight for too long, “could unduly weaken economic activity and employment,” Powell said.
With signs of inflation cooling, as well as evidence that the economy and job market are slowing, the markets now project a 100% probability (as of 7/16/24) of a rate cut in September, according to the CME’s FedWatch Tool.
We expect to learn more about what direction the Federal Reserve will take on August 22nd, when the Fed Chair delivers his keynote address at the central bank’s annual economic forum in Jackson Hole, Wyoming.
Looking Ahead
As we have mentioned before, prices have declined from prior peaks across the commercial real estate market. While uncertainty related to interest rates and the general U.S. economy remain, there are reasons for optimism. Fundamentals for many properties remain strong. The resilience of the U.S. economy and consumer spending have buoyed specific sectors. Markets have begun to price in “peak” fund rates with the Fed’s anticipated future interest rate cuts, giving the market potential confidence to move forward with more transactions for buyers and sellers.
Still, transaction volume is projected to be slow in the coming months. We continue to believe this moment produces unique, albeit few, investment opportunities. Our outlook is one of patience, discipline, and selectivity as we move into the second half of the year.
About Equity Street Capital: Equity Street Capital (ESC) is a San Diego-based commercial investment firm renowned for its focus on achieving attractive risk-adjusted returns while maximizing long-term capital appreciation. Founded by real estate investors and entrepreneurs Than Merrill and Paul Esajian, Equity Street Capital is dedicated to providing transformative real estate investment opportunities to it’s investors.
