Valyte Data

So what is driving it so high for him? Taxes would be the highest item at ~7% of market value in cook county, which, according to this math, would be zero. He would have a pretty good case for a property tax appeal here! Cook county, believe it or not, relatively straight forward now in how commercial taxes are assessed after the last assessor shook things up. Or at least much more than it used to be

@ValyteData No he wasn’t. Those are the numbers.

Spoke to a Cook County property owner this week. One of his retail buildings is 5,000 SF. Annual rent: $160,000 Annual expenses: $160,000 It is, by far, the market I hear investors say they will never touch. Nothing else in the US even comes close.

@ScottChoppin I know its tough out there, but we don't see this comp borne out in the REIT data. AVB has a large diverse national portfolio with lots of CA assets. FY 2009 was -7.1% noi growth, FY 2025 was +1.9%. 2009 was far far worse. You can see the full quarterly data back to 2005 here.

This recession is much worse for multifamily than 2008. We saw the biggest hit in for-sale housing markets in 2008, where multi was flat, slightly up, or slightly down depending on your regional focus. Plus, multi had the advantage in 2008, of people exiting the for-sale markets to go back in the multi, or people stayed in multi generally. This recession and multi parallels 2008 and for sale, in that there’s a complete shutdown of the Equity markets.

@ThinkAppraiser This math seems to imply something like an 8.75% going in cap rate on residential, assuming a mid teens capex burden on NOI, which means class A property. Class A resi is trading for ~6% cap or lower right now...

Real estate leverage is beautiful I have 375 shares of NVDA worth about $82k that now throws off about $31/month in dividends (thanks Jensen) If I invested that $82k into real estate I could put 10% down on $820,000 worth of real estate and generate approx $6900/month in gross income and after paying the mortgage, interest. Taxes insurance, vacancy and repairs probably make $1000-1200/month net After 20 years and using the cashflow to pay a little extra towards the mortgage I’d have a paid off property worth ~$2.2M that now brings in $16,000/month I’d have paid almost zero tax on the cashflow for 20 years I can refinance and pull out tax free money at any time to buy more or buy a boat NVDA would have to hit almost $5900/share to get to a $2.2M valuation It’s good to have both but I think real estate is superior because of the leverage

Our view is there is a large shortage, but it is almost 100% concentrated in NY Metro + CA. Those two areas could easily absorb 5-7mm more homes. However there is no shortage at all in almost the entirety of the sunbelt + midwest. Not coincidentally this is reflected in land prices...

JP Morgan just said the shortage is overemphasized and it’s 1.2M… a nearly 80% revision down from NAR’s 6.8M

Given both are already among the most G&A efficient reits in our coverage universe, its hard to see how this really moves the needle much for investors. Much of the synergy is likely property opex, and against a combined $4 B noi $175 mm is not a ton of savings. Especially given the costs and risks of a merger this size

Some quick thoughts on AvalonBay + Equity Residential merger announced today. 1) Big names, but still small market share. About 0.5% of the market combined. Fun fact: The combined firm will have 180k units, which is less than Equity had at its peak (225k). 2) Naturally, we'll hear cynics screaming about "pricing power" but this is just noise. In what industry does 0.5% market share give you real pricing power? Even in their largest markets (Boston, DC, Bay, etc), they're around 4% or less. Also bear in mind both firms serve the very high end of the market, true "renters by choice" making six-figure incomes and spending ~20% of income on rent. Not exactly where the affordability issues exist. 3) The firms say they'll have $175 million in operating synergies, so the play here seems more about cost and efficiencies of scale -- as well as some capital advantages as well. FWIW, the market doesn't yet seem convinced-- with both AVB and EQR stocks ticking down after the announcement this morning. 4) Interestingly, the companies announced one big new initiative -- jumping into affordable housing. Neither is a real player in that space today. EQR was big in affordable housing in 1990s and early 2000s, but sold that portfolio a long time ago. The affordable play probably has some PR/political advantages, but also legitimately does serve a real need as well. 5) Also interestingly, the firms doubled down on apartment construction. They're building a combined 10k units now and said they'll ramp it up more. Both firms have been targeting growth in the Sun Belt (they're heavily concentrated in big coastal MSAs today) so I would assume that continues unless "NewCo" pivots. (The combined firm will operate under a new name yet to be announced.) 6) "NewCo" is positioned as a "merger of equals" and that makes sense in a lot of ways. They'll even maintain dual HQs in Northern Virginia and Chicago, though it's difficult to see Chicago winning that battle longer term. AVB's CEO (Ben Schall) becomes CEO of new firm, while EQR CEO Mark Parrell will retire. The Board chair comes from the EQR side. Will share more thoughts in an upcoming newsletter on my website. And, as always, these are just things I find interesting -- not investment advice whatsoever.

The survey methodology did change in 2024 so you could argue that this is not true apples to apples with historical data, but still concerning! Multifamily is also already precarious given the current supply wave...

CONSUMER SENTIMENT FALLS TO RECORD LOW. As of yet though no signs of this in retailer leasing at retail REITs. Could this be a sign of reduced demand to come? sca.isr.umich.edu

Investors will likely benefit from a lower G&A burden and greater efficiencies in operations, but we believe the change is relatively small at the margin and likely won't have significant impact on the stock prices as both companies are already among the most G&A efficient in Valyte's coverage universe

Avalon Bay ($AVB) and Equity Residential ($EQR) announce mega merger of equals. The pro forma EV at today's prices would be $69 billion, and the combined value of their underlying assets would be $80 B + given their significant discounts to NAV. investors.avalonbay.com/news-events/pr…

@EdelkopfYossi If only people knew they could buy multi REITs for higher cap rates and lower fees!

Easiest way to scale up to $100M of multifamily real estate: Convince 2,500 people that a 5% cap is a great deal and they should invest $10k

@NewsLambert Honestly surprisingly low - Jacksonville multifamily probably down closer to 25%.

Home price shift since 2022 peak across core of Jacksonville, FL via ResiClub Terminal

Valyte doesn't have data center coverage yet (its coming!), but this nugget was too interesting not to share!

Anthropic appears to be paying 15 to 25 million per MW of SpaceXAI compute its renting per the SpaceX S1, depending on what percentage of the 1 GW Ant is taking. That is ~7 to 12x higher than what the neoclouds are getting on a per MW basis! SpaceX likely Anthropic's only option and could price as such. The flipside of this is that Anthropic likely replaces this very expensive compute with significantly cheaper options over the next few years as more data centers come online. Either party can cancel the rental with 90 days notice, so lots of flexibility there.

Simon Property, $SPG had one of the strongest performances in the whole REIT sector, with a whopping 6.7% YoY NOI growth for the quarter. NOI growth has been accelerating as strong leasing continues to drive occupancy gains (although unfortunately SPG does not disclose leasing volumes like some other REITS). We are hereby adjusting SPG's cap rate to 6.33%, which significantly increases their NAV. The mall sector still carries some idiosyncratic dead mall risk you don't see in strip centers, but the continued strong performance warrants SPG's cap rate to be among the lowest in the retail sector. If the strong operating environment continues for malls it wouldn't surprise us to see mall cap rates continue to decline and become among the lowest in CRE, as they were for many years before the retail sector began to weaken ~10 years ago.

@ChrisRamsey60 Look at REITs! You can buy class A multi reits for nearly ~6.5% cap rates, fully stabilized. Plus you benefit from a low fee, highly efficient management structure

Do you ever just sit back and think to yourself there’s gotta be a better way than multifamily to make money in real estate?

The REIT sector has held up very well the last 5 days and is basically flat, despite a rapid rise in the 10 year treasury over the same period, including a brief spike to almost 4.7% yesterday. It was only a few years ago when REITs seemed to trade in lockstep with the 10 year, has that relationship finally broken down? Perhaps the market is finally realizing real estate can be a good inflation hedge

One of the weaker performing multi REITs this quarter on the operations side was Nexpoint Residential, $nxrt. NXRT had its second straight quarter of same store NOI decline, following a brief return to growth in Q3, and its 6th quarter of decline since Q2 2024. New rent growth is even worse, at -6.6% YoY. This could be why NXRT trades at a significant ~30%+ NAV discount, as the public market forecasts more pain to come for sunbelt B multifamily. For now though private market cap rates have held up and the NAV gap persists. Management could attempt to sell individual assets and return capital to investors but NXRT is already on the smaller side, so this would come at a cost of G&A burden efficiency.