Single-family office Casoro Capital Partners LLC has given birth to a non-traded REIT called Upside Avenue.
The new REIT will invest in income-producing multifamily, seniors housing and student housing assets across the country, says Yuen Yung, CEO of Austin, Texas-based Casoro Capital. With a minimum buy-in of $2,000, accredited and non-accredited investors around the globe can participate in deals alongside Casoro, family offices, high-net-worth investors and institutional investors.
“The world of real estate opportunities is changing because the laws have changed, which is now allowing—finally—non-accredited investors to get into institutional-type deals,” Yung says.
In welcoming both accredited and non-accredited investors, Yung says Upside Avenue is embracing a “Main Street versus Wall Street” approach to real estate investing. Upside Avenue is projecting IRRs of 12 percent to 16 percent, with half of that in the form of annualized yields, according to Yung.
The REIT has a $3 million threshold before it can start allocating capital for real estate deals, Yung says. As of mid-August, it was close to one-third of the way toward that benchmark.
Casoro Capital’s parent company is commercial real estate investment firm The PPA Group, also based in Austin. In partnership with PPA, Casoro Capital has closed more than $1 billion in real estate transactions.
In a Q&A with NREI, Yung discusses how Upside Avenue differs from similar investment platforms, why the REIT is concentrating on the multifamily, seniors housing and student housing sectors and what his advice is for real estate investors in the current cycle.
This Q&A has been edited for length, style and clarity.
NREI: Why is now a good time to launch a non-traded REIT?
Yuen Yung: With the market at an all-time high, a good deal of investors and their financial advisers are looking to move a portion of their portfolios into private real estate that does not have the peaks and troughs of the stock market. These market factors—combined with increased awareness of new low-fee, low-minimum, non-traded REITs—are making them an emerging alternative for investors looking for diversification across multiple properties out of the stock market.
NREI: How does your online platform differ from all of the other online investment platforms out there?
Yuen Yang: One difference is the fee structure. A lot of the platforms you see out there with the other REITs are very cost-heavy—there are commissions paid, there are heavy fees—so the investor ends up getting a very small return. The reason we’re going to be able to hit our targets is that we’re designed to be very low-fee.
NREI: Why is Upside Avenue concentrating on multifamily, seniors and student housing?
Yuen Yang: Early on, when we go to college, we all need a place to live. So, the enrollment numbers are growing, and we felt like student housing was a very good sector to go into. The multifamily space has grown and continues to grow, especially in areas where there’s a lot of job growth and population growth. And in senior living, a lot of baby boomers are giving up their single-family homes because of the amount of work it takes for upkeep, and if they want to travel, it’s hard for them to leave their house behind, so they’re opting for more community-oriented spaces.
NREI: What’s your take on market concerns about overbuilding in the multifamily sector?
Yuen Yang: You have to look at it market by market. There are a number of markets, such as Oklahoma City and Houston, where the population growth is trending up while new starts are on the decline.
You also have to look at what’s happening across all asset types. The class-A market, which new builds generally fall under, may not be the best asset strategy for the market and overall demographic trends in an area. In many areas, we look to acquire class-B and class-C assets, which often still experience positive rent growth even when there’s an abundance of class-A units added to the market.
NREI: Is Upside Avenue looking at new construction or existing properties?
Yuen Yang: Because we’re an income-focused REIT, we are very focused on existing properties where there is some cash flow already and, with some slight to moderate modifications, we have the ability to enhance that cash flow. We’re really not going to focus much on new development; we might do a little bit, but that’s really not the focus.
NREI: How much does Upside Avenue plan to invest in each asset?
Yuen Yang: It could be anywhere from $1 million in equity up to $10 million to $15 million. We’re not as worried about the size of the deal; we’re more interested in the fundamentals and financials of the deal.
NREI: What will the hold periods be for Upside Avenue’s investments?
Yuen Yang: Typically, it’s a long-term hold, but investors will have liquidity after three years. There’s a 2 percent penalty in year one and a 1 percent penalty in year two, and then if they hold it till year three, there’s no penalty. For investors to get the most advantage out of the REIT, they really should think of this as a three- to five-year investment, at minimum.
NREI: Based on where the market is now, what advice do you have for real estate investors?
Yuen Yang: My biggest piece of advice is to work only with sponsors and operators who have been through both up and down market cycles. We are very late in the cycle right now. Experienced teams are changing their assumptions on underwriting and being way less aggressive. This is even more true with value-add assets, which often require very extensive repositions. Established firms are also often capitalized enough to make it through lean times when fewer deals are getting done.
You can still make a lot of money at this phase of the cycle, but you have to be less aggressive and be with a team positioned to play the long game.