PlanOmatic

Multifamily Investors Beware (Including HLC LP’s)

(This letter is being shared with HLC Equity investors and is published here purely for informational purposes. Further disclaimers at the bottom)

Dear HLC Equity Investors-

By now you have received our updates about the significant operational plans that we have put into place in an attempt to protect our staff, residents, and assets from what is transpiring as a result of the Coronavirus.

As an HLC Equity investor, you place your trust in us because we tell you how we see it, without the dog and pony show.

Warren Buffet has warned investors about preconceived notions. One preconceived notion when it comes to real estate investing that has always made me cringe, is the belief that multifamily real estate is immune to broader market disruptions because people always need to live somewhere.

While we have been investing in multifamily properties for years, and we do believe that by investing in multifamily properties throughout the US we are able to deliver superior risk adjusted returns, this notion always bothered me because it assumes that residents can pay the rent!

I believe that we are at one of the most trying periods in history for the modern economy in general, and the multifamily industry is not immune. At the rate this is going, the global economy will be hit hard, many businesses are suffering, and it’s likely to trickle down to the masses. Multifamily owners and operators are going to be put to some significant tests over the coming months. If there is a multifamily sponsor or operator out there who is telling you differently, they are either delusional, or in denial.

Do I hope that I am wrong? Absolutely.

Am I bullish on multifamily investments over the long term? Certainly.

However, HLC Equity has been in the real estate investment business for decades, and we plan on being around for several more decades, so as an owner and operator of a myriad of real estate assets, we prefer to always err on the side of caution and preparation.

The multifamily industry is about to face a bumpy ride, where only the best owners and operators will survive. We are preparing for that ride, and the opportunities that may ensue as a result.

Truly,

Daniel Farber

(This letter is not an offer to sell or the solicitation of an offer to purchase securities.

This letter includes forward looking statements that involve risk and uncertainty. Sentences or phrases that use words such as “expects”, “believes”, “anticipates”, “hopes”, “plans”, “may”, “can”, “will”, “projects”, and others, are often used to indicate forward-looking statements, but their absence does not mean a statement is not forward-looking. Such statements reflect HLC’s current opinion and are designed to help readers understand HLC’s thinking. By their very nature, however, such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.)

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