Brian D. Milovich

1) Will Calvera’s ratio of debt/equity for acquisitions change in 2024?

I’m starting to see some acquisitions pencil to 70% loan-to-value (LTV) which is a big improvement from 9 months ago when it was closer to 55% LTV. Our fund has a LTV limit of 75% for any single asset and 65% for the portfolio. We find it promising to be within those ranges as we seek acquisitions in 2024. That means more properties for the Calvera Income and Growth Fund.Click here to see the rest

Why are people still extolling the virtues of bridge debt today? You won’t hear it from me, but here’s their argument: 1) the Fed is going to stop raising rates and you don’t want to be locked into fixed rate debt; 2) you can buy an “in-the-money” cap to bring the interest rate down from 9% to 7% or lower; and 3) a value-add business plan is going to raise net operating income, therefore allowing an investor the option of refinancing or selling during their three-ish year business plan. Never once do I hear any of these groups discuss that they’re taking on more leverage than the property can adequately sustain today.

At no point in the past 20 years can I recall spending so much time wondering about where this interest rate will go. Interest rates matter because they impact property values. Rates also impact capitalization (i.e., debt vs. equity amounts) and cash flow. Real estate is frequently a leveraged investment, meaning debt is used to finance the purchase. When debt is used, it can make a good investment great, and it can also turn a good investment bad.

Taxation is one of the hottest topics for our investors. Not only are they concerned about how much they might have to pay, but they’re also concerned with the potential hassle that tax reporting can create. When making an investment in real estate, it’s important to have a tax plan in mind and a full understanding of your filing requirements and the potential cost.

1) What are the advantages of your “evergreen” structure?

The biggest benefit is that your money keeps working for you. We will work to defer any capital gains taxes indefinitely. This allows you to fully maximize your investment with us. Also, with a focus on cash flow, regular and growing quarterly distributions are another benefit. Click here to see the rest

1) Why invest now versus putting available funds in a money market fund?

You can do both! We do not call your commitment unless we’re acquiring a property. In the meantime, you can keep your dry powder in a US Treasury or money market fund earning 5%. Once we call your investment, you start earning a preferred return and will be investing in a property with a return target in excess of 10%. Being an investor now puts you in the best position to reap the rewards of Calvera’s distressed investing. Click here to see the rest

Back in 2010, we launched Calvera out of the Great Financial Crisis without capital, a deal, or long-term vision. All we had was a belief that there was going to be a major opportunity in the apartment market. Today, I’m getting similar vibes to when we started Calvera. Our enthusiasm is high. There are opportunities starting to trickle out with more on the horizon. The market fundamentals are very different than in 2010, but the opportunity is the same.

1) Have we reached bottom in the distressed commercial real estate market?

Not in multifamily. Distress isn’t even fully here yet. We have only seen the initial cracks of expiring interest rate caps and loan maturities. The bid/ask spread remains wide enough to stymie transactions. Keep an eye on 2024. Click here to see the rest

The people who I look up to in real estate are those who have been invested for the long-term. They largely invest their own money, self-manage their properties, rarely sell assets, use modest-to-no leverage, and continue to accumulate properties. This investor doesn’t buy when prices are high and is a favored buyer when the market is in distress. The Calvera Income and Growth Fund is specifically modeled after this successful investor profile.

We uncover new investment opportunities many different ways -off-market, on-market, and limited market. Sourcing properties off-market gets all the attention. It’s what everybody wants, but it’s not always the best deal.