Breneman Capital: 2022 Year-End Review
2022 was quite the year. Despite the market turbulence, it was a successful year for Breneman Capital and its investors. From the last week of 2021 until December 31st, 2022, we transacted on $60M+ of real estate, selling 4 assets in Chicago and acquiring 5 assets in Phoenix.
Sold:
3600 N Oakley Ave - 24% IRR, 2.7x Equity Multiple, 9-Year Hold
1846 N California Ave - 45% IRR, 2.3x Equity Multiple, 6-Year Hold
1701 N Kedzie Ave - 27% IRR, 2.1x Equity Multiple, 6-Year Hold
1353 W Bryn Mawr Ave - 17% IRR, 1.7x Equity Multiple, 6-Year Hold
Acquired:
Echo Tempe, Tempe, AZ - 24 Units, 3.50% Loan, Off-Market
Moda Tempe, Tempe AZ - 20 Units, 3.50% Loan
Aero Phoenix, Phoenix, AZ - 21 Units, 3.50% Loan, Off-Market
The Quin, Mesa, AZ - 96 Units, Variable Rate + Interest Rate Cap
Lofts on 3rd , Phoenix, AZ - 29 Units, 4.25% Loan, 1031 Exchange
These transactions tell a story of our thoughts on the future of real estate, the kinds of assets we want to own, and our commitment to offering exceptional investment opportunities to our investors. Our acquisitions in the sun belt are not a new beginning but a continuation of what we do best: creating value for our investors.
We targeted prime established or gentrifying locations with our acquisitions in 2022, with one in downtown Phoenix, two in Tempe, and another in the up-and-coming Mesa submarket. Additionally, four of the five assets have fixed-rate loans with 5- or 7-year terms. Excellent for cash flow on the stabilized assets and allowing us to execute our business plans and opportunistically time our sales without the need to refinance. These low-rate loans offer significant downside protection as we proceed into a period of economic uncertainty, an advantage that many of our peers will not have in the 36 months ahead.
During the tail end of the year, we focused on minimizing the downside while still positioning ourselves to take advantage of the upside instead of following the herd into higher-risk, higher-reward opportunities. We saw our peers move further out of the risk spectrum with their financing choices. Most began or continued using variable-rate debt-fund loans due to their larger loan proceeds, boosting their underwritten returns with the higher leverage. Others moved from acquisitions to development (just as construction prices and new units under development exploded). This is why you have seen fewer offerings & acquisitions from Breneman Capital in the past 6 months. However, we want to emphasize that the team has not shifted our core investment philosophy in the past months. In fact, it is the same philosophy we have always had and is why you have not been receiving any offerings: we would not send you investments we would not invest in ourselves. This has and will always be non-negotiable to us.
2022 also saw us further develop and optimize our in-house tools to manage and evaluate investment opportunities. We acquired hundreds of millions of data points to analyze target markets, investing hundreds of hours to ensure that we are looking for opportunities in the best parts of the country—and have positioned ourselves to be ready for the moment when deals begin to make sense for our investors in the months ahead.
Going into 2023, Breneman Capital continues analyzing hundreds of offerings, both on and off-market. We have become more restrictive with our investment criteria. As we still navigate in a time of market volatility, our method for success is about eliminating variables, minimizing execution risk, and sticking to our core competencies.