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Newsletters & Latest News
SPI Updates
It’s been an eventful year. High inflation, rising Fed’s Interest Rates, economic uncertainty and political divisiveness. However, for SPI it’s been a calm and consistent year. Our warehouse has delivered strong cash flow as we have had perfect rent collection since we acquired the property in 2021. We have also been on the lookout for any investment opportunities and are in position to move once a good opportunity presents itself.
Since our inception we have paid out $148k in profits to our investors. It has been an honor and a privilege to do the work that we love, and we are looking forward to continuing to create investment opportunities that benefit our investors and our community.
Broad Ripple Warehouse (SPI III)
We are pleased to announce that Ripley Auction has signed a new lease agreement. This is a 5 year triple net lease agreement. Ripely Auctions has been a great tenant the last few years and we look forward to continuing the relationship, with consistent rental revenue for years to come.
A triple net lease is a lease that requires the tenant to pay rent, property taxes, property insurance, and repair/maintenance costs. This type of agreement is common in commercial real estate and is a very ideal type of lease agreement for the landlords because it reduces risk while also generating long term stability in cash flows. Our tenant will also benefit from having 5 years of predictable rent expense. This agreement is truly a win win for both SPI and Ripley Auction and we are excited for the continued tenancy with Ripley Auction.
The State of the Housing Market
2022 Median Sale Price in United States hit a Peak of $400,000, which is an increase of over 40% in property values since 2019, among the fastest rate of median home sales price increases in U.S. history.
However, Median Sale Price is showing signs of price drops and has dropped $20k from peak in 2022 compared to the peak in 2023. This is a 5% decline in median property values from peak to peak or year over year. Because of the declining in Median home prices continued strong growth is very unlikely in our current housing market.
Also, with the Federal Reserve, Fed’s Fund Rate sitting at 5.25% to 5.50% this has pushed mortgage interest rate on average between 7% to 8% for a 30 year loan. This will likely add more downward pressure of property values and result is a softening market and more price drops in listing prices and home sales.
Founders’ Message
Sovereign Property Investments has generated an average annual rate of return of 30% for its investors since we founded the business in 2019. While we are quite proud of these results, we owe a great deal of this success to the very low interest rate environment and strong GDP growth that we have experienced over the past several years. We were able to capitalize on these factors to generate strong returns for our investors while also improving our community and providing affordable housing for our tenants. We are extremely proud of our achievements these last few years but at the same time cautious, as there is elevated risk and uncertainty in the current market.
Housing market conditions continue to worsen with the Fed determined to cool off inflation fears by increasing the Fed’s Funds Rate to 5.50%. This is the highest Fed’s Funds Rate in over 20 years. We have entered into a new/changed market dynamic that will require different strategies for success.
Going forward our goal is to build on our success and the returns we have had, while also recognizing that the market has changed and there is elevated uncertainty. However, where there is uncertainty there is also opportunity to capitalize on falling housing prices by buying properties at discounts, generating higher returns.