The Current JB2 Sentiment
There has been a lot of talk about the Recession and volatility in the market. We wanted to take a second to talk about what this all means to us and what we see moving forward.
Honestly, our business was built for times like this. Even when the world seems to be melting, our tenants pay rent, and we just had one of the best quarters. We beat projections by 38% in Q2 2022. We were able to distribute more than 100k distributions to our investors in the quarter for the first time for JB2.
The current debt market is making it challenging for deals to pencil. Sellers aren’t quite there yet on the reality of where pricing should be, or they are just staying put for the moment. So, there needs to be a meeting of the minds with pricing between buyers and sellers.
Though we just put a deal under contract. We just got excellent debt terms. That has a lot to do with our current knowledge of the OKC market and the connections we have forged.
When it comes to underwriting, we aren’t changing much. We have always been conservative, and it has shown through performance. We are trying to put more cushion where ever possible. We take a very data-driven approach to what we see. We feel confident in the face of uncertainty that pushing forward is correct. Below you will see what rents have done over the last 22 years in OKC. Only two of those years didn’t have any rent growth. One was during the 08-09 recession, only 2.7% or 18 dollars. That is something many times we can absorb. At a minimum, we can take a 25% hit on all our deals before we break even. On the next acquisition, we are at a 32% breakeven point. We feel very well situated for any storm.
In reality, we are more excited than anything. We feel there may be better deals coming. The last couple of years of getting entrenched and creating relationships in the Apartment world in Oklahoma have given us a trajectory to take advantage of that. At the same time, we are continuing to keep our strict underwriting standards.
Our play of increasing operational efficiencies will shine more when the ability to increase rents will damper. Though we always look to be able to raise rents as well. We are prepared for whatever may come our way. We will continue to forge ahead, buy good deals, operate efficiently and bring great returns to our investors.