Newsletter February 2024

Over the past two decades, there has been a significant shift in investment patterns, with sophisticated investors now directly allocating capital to North American sports franchises.

Fun Facts:

• The sports industry has offered exceptional returns without correlation to other asset classes, and resistance to economic downturns.
• North American sports, in particular, have demonstrated remarkable resilience and growth, even in challenging economic conditions.
• Investing in a sports team offers dual value – ownership of a share in the global intellectual property business (the league itself) and live entertainment revenue. This unique advantage contributes to the industry’s stability and attractiveness as an investment.

Having an owner’s mindset means investing in the products you value and the growth of the company, rather than only buying the depreciating product.

• If you had bought Apple shares worth every new iPhone model on Apple Event Day from 2007, you would have converted $17,000 dollars to $367 million dollars.

ICON, a construction tech company based in Austin, is addressing supply, cost, sustainability, and homelessness with 3D-printed buildings.

Impacts:

• Revolutionizing Housing: Similar to the shift from wooden to steel bridges, ICON’s robotic construction technology is poised to revolutionize housing, enabling the efficient and sustainable construction of diverse homes.
• Speed and Scalability: ICON’s technology allows for the construction of homes up to 10,000 square feet at an average pace of one house per week, demonstrating both speed and scalability in their construction process.
• Moving to Scale: Having progressed from prototyping, ICON is now scaling its operations by constructing robotically-built neighborhoods and providing customers with a digital interface to find their ideal homes, marking a significant advancement in their technological and operational capabilities.

Viking Capital is dedicated to protecting your capital and each investment made with us.

In the meantime, if you have any questions, do not hesitate to reach out to our Investor Relations Team.

Onward & Upward,

Multifamily 2024 Market Forecast:

• Rent Trends: Yardi Matrix reports a modest 1.6% increase in multifamily rental asking rents nationally in 2023. However, upcoming trends signal a notable shift in the market.

   

• Increased Supply: Record-high available supply is expected to temper rent appreciation, particularly in areas that thrived during the pandemic. Negative growth may occur in some markets, despite higher absorption rates, as the market integrates this new supply over more than a year.

• Rent Gap Reduction: The gap between in-place rents and asking rents is shrinking, indicating a move toward market stabilization. This trend suggests a departure from the larger rent increases seen in previous years.

What this means for investors:

For investors in multifamily properties, the developments in 2023 signal a crucial shift. With the absorption of excess supply and stabilization of rent growth, the market is poised for more predictable returns. Looking ahead to 2024, this equilibrium between supply and demand presents promising opportunities for investors seeking stability and growth in their investments.

To learn more about Viking Capital’s 2024 Forecast, listen to our latest podcast with Marcus & Millichap’s lead Economist, John Chang.

Join Viking Capital’s latest podcast episode with Vikram Raya where he discusses the ascent of Viking Capital. From humble beginnings from a “stupid side hustle” to just under $1 Billion in assets, learn how he plans to change the real estate game.

Listen today and learn:

• Pivot into Multifamily: Explore the pivotal moment that prompted their transition to multifamily real estate, reshaping their wealth creation strategy.

   

• Power in Partnership: Learn how partnership and proper hiring have revolutionized Viking in the past 7 years.

   

• Overcome Obstacles: Ravi Gupta and Vikram Raya delve into the challenges they’ve tackled in both business and the multifamily arena – covering hurdles, strategies, and triumphs.

   

In February, Viking Capital’s acquisitions and asset management team went to NMHC the Top Apartment Operations Conference in the United States. These were our Top 3 Takeaways:

• Tech for Tenant Experience: Data and AI are key for improving tenant satisfaction. Standard tech amenities enhance experiences and provide valuable data.
• Operational Challenges: Large owners are self-insuring to manage insurance costs. Rent control discussions persist, and operational efficiencies are key to managing rising costs.
• Economic Outlook: Inflation is easing, likely prompting 3 to 4 interest rate cuts in 2024. Immigration will influence demand, especially in affordable markets.

The Tax Relief for American Families and Workers Act of 2024 aims to extend 100% bonus depreciation for qualifying property, incentivizing investment.

• This provision allows businesses to deduct the full cost of qualifying assets in the year they are placed in investment, rather than depreciating them over time.

   

• While the bill’s fate is uncertain in the Senate, the proposal for bonus depreciation is unlikely to see substantive alterations.

Read More on Bonus Depreciation for Investors HERE.