Opportunities amid uncertainty: Private Real Estate

November 18, 20225 min read
Opportunities amid uncertainty: Private Real Estate
Share on facebookShare on TwitterShare on Linkedin

Amid record high inflation and the Fed’s consecutive interest rate hikes to reign it in, investors may be wondering which asset class can help them stay insulated from the broader market forces.

While every investment carries a certain level of risk, real estate investments have historically been viewed as a safe(er) haven in times of a market downturn. This is because real estate can be an effective inflation hedge, carries low correlation to traditional markets, and has even benefitted in times of market downturns, generating outsized returns from more quality lenders or sponsors. 

Hedge against high inflation

Real estate investments are secured by hard, tangible assets that have an intrinsic value. Historically, these assets have also outperformed public equities during periods of inflation and high-interest rates. 

Rent prices often increase in order to keep up with inflation. Income earned from regular rent increases on the properties can also  help investors navigate increasing prices, and the high interest rate environment. 

Case Study: Tucson Multifamily Equity
Yieldstreet’s Tucson Equity deal is an example of how inflation can benefit a real estate investment, because of the effect on rent prices. Amid record low housing affordability, rental units in the deal saw a $450 rent increase on renovated units, compared to the $150 that was underwritten – thereby outperforming projections. While the deal faced increased interest payment due to interest rate hikes, it also was structured with an interest rate cap, an agreed upon maximum interest rate between the borrower and the lender, which was purchased at closing. Because of the cap on interest payment at a certain level, the deal was insulated from the Fed’s new rate hike. 

Low correlation to traditional investments

Moreover, historically, real estate investments have shown low correlation to stocks and bonds and offered diversification benefits to investor portfolios.

Private real estate debt portfolio for example (as represented by the Giliberto-Levy Commercial Mortgage Performance Index) has produced low to negative correlation with US and global equities in the past ,while private equity real estate has shown modest correlations with public equity real estate and US and global bonds. 

Low correlation also helps private real estate act as a hedge against public market downturns.

Capitalize on rising rates

In general, Yieldstreet’s real estate debt offerings can be in the form of fixed rate debt or floating rate debt. 

Fixed rate debt can be advantageous for borrowers who don’t want to take the risk of rising interest rates. With floating rate loans , interest payment increases as the underlying benchmark rate increases. 

A floating rate debt is typically structured with an interest rate cap, similar to the Tucson equity deal, which limits the increase in interest rates at a certain level. Meanwhile, a fixed rate debt “fixes” the amount of interest payments, and keeps it one consistent level.

The chart below summarizes these differences. 

Fixed rateFloating rate 
Presents with a lock-in a low rate Can be advantageous for borrowers who don’t want to take the risk of rising interest ratesInterest payment increases as the underlying benchmark rate increasesTypically structured with an interest rate cap which limits the increase in interest rates at a certain level
Case Study: Norfolk Industrial Complex
Yieldstreet’s Norfolk Industrial Complex deal, which was driven by strong warehouse demand in Norfolk Virginia, is an example of equity investment with a fixed rate debt. Even amid high interest rates, it’s still set up to generate a consistent  cash flow due to “fixed” interest payments, thereby providing investors with a consistent source of regular income, irrespective of changes in the Fed’s rates.

High quality lenders or sponsors seek alternative capital 

As  big banks and large institutions tighten credit in times of economic stress, alternate lenders often get better access to high quality lenders or sponsors. This can in turn generate higher returns for similar risk profiles. 

Case Study: Portland Multifamily Financing
Yieldstreet’s Portland Multifamily Mezzanine deal is with a top developer in the Portland area, who has a 20% equity stake in the deal. As of now, the deal has an 80% LTC, or loan-to-cost ratio that generates around 12% return.

Gradual changes in price

Unlike public markets where investor sentiment can cause significant swings in market value, real estate pricing tends to move gradually – which affords investors valuable time when making decisions amid economic distress. 


How Yieldstreet selects real estate opportunities 

In times of a market downturn, flexibility is key. Unlike many other real estate investment platforms, Yieldstreet deals play across the capital structure. Not confined by a position in the capital structure, our team selects deals — whether it’s debt, equity, mezzanine or preferred equity —primarily based on market conditions and risk profile.

We are currently focused on multi-family and industrial properties for the following reasons:  

  • Both property types are an inflation hedge because they’re on shorter term leases, which allows them to react quicker to the market.
  • In the case of multi-family, the rising cost of a mortgage acts as a tailwind, as renters tend to rent for longer and are driven by necessity rather than choice.
  • While many lenders have retreated from the marketplace for a multitude of reasons (i.e., issues in their existing portfolio, warehouse lenders pulling funding, capital markets being closed), debt for multi-family is still available albeit at a higher cost. That should provide a deeper bench of lenders and buyers, setting a floor for this property type.

Moreover, the due diligence process at Yieldstreet is comprehensive and meticulous. The approach is two pronged; the team focuses both on the property and the sponsorship of the investments. 

  • Property: includes visiting the property, carefully selecting the type of deal, evaluating the tenants at the property, doing appraisals, property condition reports and even environmental reports
  • Sponsor: ensure the sponsor has the experience and expertise of the local market, as well as an outstanding track record in conducting similar deals 

Invest in private real estate on Yieldstreet

Explore our open opportunities

All investments involve risk, including the possible loss of capital.   There can be no assurance that any product or strategy described herein will achieve any targets or that there will be any return of capital. Past performance is not a guarantee or reliable indicator of future results. Current performance may be lower or higher than the past performance data quoted. Any historical returns, expected or target returns are hypothetical in nature and may not reflect actual future performance.  All performance and/or targets contained herein are subject to revision by Yieldstreet and are provided solely as a guide to current expectations.   

References to specific assets/securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such assets/securities. The investments/securities referenced may or may not be held in the Offering at the time of publication and, if such assets/securities are held, no representation is being made that such assets/securities will continue to be held.

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetalternativeincomefund.com. The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

300 Park Avenue 15th Floor, New York, NY 10022

844-943-5378

No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

Yieldstreet is not a bank. Certain services are offered through Plaid, Orum.io and Footprint and none of such entities is affiliated with Yieldstreet. By using the services offered by any of these entities you acknowledge and accept their respective disclosures and agreements, as applicable.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure