Hello,
Below is a link to our year-end investor letter if you’d like to review. Beneath that is some market color on apartment / SFR rents + projections based on what I’m hearing from REITs we follow.
Year-End Letter
We delivered a 9.4% cash flow yield, which exceeded our income goal.
The next ex-dividend deadline is next Monday (1/31/22). Link to letter below:
Market Update
Rents are high and they’re going higher.
The perfect storm for landlords continues. Surging housing prices + low vacancy + rising wages = huge embedded rent growth.
Apartments
The stage is still set for record apartment NOI growth in '22 (13.5%)
Apartment REIT occupancy is at 96.5%, above 2019 levels
Expenses (taxes, insurance, etc.) are also increasing, just not as fast as rents (expenses projected to be up ~5% in 2022)
New developments are coming but are behind due to supply chain issues
Single Family Rentals
Occupancy rates have gone vertical (from 93% to 98% in 2 years)
SFR rents should grow upwards of 11% in 2022 and 7% in 2023
Sector has more pricing power than it knows what to do with - If SFR owners are smart they should probably sandbag a bit and not overstrain tenant wallets
Inflation - Housing Components
Market data suggest that prices have even further to rise.
Rent increases will continue to flow through to the shelter component of CPI, which is positively correlated with housing prices.1 These components are not dropping anytime soon, therefore the other components of CPI would need to fall a lot faster for inflation to get down to a manageable 2-3% in the near term.
Housing Components of CPI
Like housing costs, wages are also harder / slower to pull back.
Thanks for reading.
Brad Johnson
Source: Bureau of Labor Statistics and Blackstone Investment Strategy as of 12/31/2021; S&P 500 Dow Jones Indices, as of 10/31/2021 (data available on a 2-month lag). CPI measures represent the Consumer Price Index for all urban consumers (US city average) and are seasonally adjusted.