It’s not news that the volatility of interest rates and credit risk have worked together to create instability in US real estate markets. The consequences of this volatility have strained capital sources, both equity and debt alike, which has had a negative effect on commercial real estate valuations. With uncertainty about when these valuations will rise you may be asking yourself what this means for your portfolio. Though the economic climate is unstable, with RockStep as your investment partner, you can take advantage of these low property costs and invest in assets with significant potential upside.
The total market of insolvent malls across the country is approximately $35-40 billion and growing. The reason for the growth expectation of the Insolvent Mall Total Addressable market is due to maturity or refinancing risk, a risk that hasn’t been prevalent in U.S. markets since the mid-1990s. The result of which is that real estate principals are increasingly looking to sell before there is further pressure on prices and to take advantage of the liquidity that is available to reduce risk and preserve as much equity as possible.
As professionals are building the appropriate capital structure for each investment opportunity, RockStep is also focused on taking advantage of this imbalance in the real estate and capital markets to obtain well-performing retail real estate assets at a low basis from motivated sellers. Every economic phase presents opportunities that produce asymmetric returns that can be realized. With attractive prices and property fundamentals continuing to improve, generating free cash flow at an attractive current yield and the expectation of cap rate compression upon the exit, returns for mall repositioning and remerchandising strategy are producing extremely compelling risk-adjusted returns.
RockStep has narrowed its focus specifically on two verticals within the retail commercial real estate landscape: distressed malls in major markets and power centers. From a relative value perspective, these properties are out-performing many other sectors within commercial real estate, including multi-family housing, office, hotel and industrial centers. Each strategy is focused on the portability of cash flows, strong markets with major demand drivers and a cost basis that represents a significant discount to prior value and land value.
As mentioned above, there is a large market of motivated mall and power center principles, and RockStep has demonstrated the ability to identify great opportunities, reposition and revitalize these projects to generate strong returns for investors. RockStep has an impressive track record of successful projects in this space and is moving on available projects that possess certain characteristics proven to generate successful outcomes.
Don’t look back and wish you’d invested when valuation was low. Take advantage of the market and partner with RockStep today. Fill out the form below to download our Asymmetric Returns White Paper and speak with an expert.