Q2 2022 Quarterly Roundup
There was a substantial dislocation on the institutional equity side of our industry as players continue to seek equilibrium regarding asset pricing and interest rate exposure. While still ongoing, consensus on whether or not the aggressive interest rate increases will cause a recession over the next twelve months is still a matter of debate. New Standard Equities is monitoring the debt and equity markets, yet remains bullish in the sector. While the effects of rising interest rates have had a significant impact on cash flow, rents across our entire portfolio have been rising at an unprecedented rate. Of course, rent is a part of the inflation metrics that the Fed is trying to control, but inflation is not the sole culprit behind the tremendous revenue bumps in NSE’s rent rolls. The firm’s investment thesis has always been to work in markets with a sustained imbalance in the supply and demand for housing. Further, the Acquisitions team has carefully selected markets that exhibit high education levels and cater to the knowledge economy. There have certainly been inflationary pressures in NSE’s markets on wages, but that’s also helped tell the story of why many properties are reacting well to leasing programs, often producing lease trade-outs ranging from 15% to 40%. Operationally, the firm is perhaps the strongest it has been since the beginning of 2020.
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