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Perspective
September 2020

Staying Solvent Amid Unpredictability

As the world and its economies continue to grapple with the effects of a global pandemic, it’s easy to fear for the worst in consumer-dependent industries like retail, real estate, sports, and hospitality. At CARROLL, however, one of our foundational business principles is a focus on cash-flowing investments. This innate belief is one of the main reasons we’ve been able to stay the course amidst multiple storms and embrace volatility in the market.

As the world and its economies continue to grapple with the effects of a global pandemic, it’s easy to fear for the worst in consumer-dependent industries like retail, real estate, sports, and hospitality. These sectors are often on the forefront of those impacted by significant changes in income and behavior, and the fallout from the pandemic has been a harsh reality for many. However, not all companies in those sectors have suffered the expected fate.

At CARROLL, one of our foundational business principles is a focus on cash-flowing investments. This seems like a no-brainer, but that innate belief is one of the main reasons we’ve been able to stay the course amidst multiple storms. With revenue coming in, our teams can continue to prioritize strategic operations and customer-service initiatives for both residents and investors – ensuring the health and prosperity of our current assets and future investments. We have built our portfolio around durable rent rolls in diversified economies with scaled affordability models, allowing us to embrace volatility in the market.

Despite the significant increase in rent delinquency seen across the industry, CARROLL has an average rent-collection rate of 96 percent throughout the pandemic. But dominance is based off of more than rental collection. Success is a measure of a company’s economic model as a whole – occupancy, new lease and renewal growth, bad debt, and overall expense control, all factor into the net operating income and the cash flow performance. Not forgetting locality, demand will always be there for affordable places to live, and location is key with real estate.

While other cash-strapped firms have faced liquidity issues or forced divestments, CARROLL has been actively seeking new investments throughout the pandemic. Not only have we made moves in the multi-family space, but we have also been highly focused on the potential of acquiring or investing in legacy-bitten operators that are undercapitalized and do not have large-scale investment and management platforms.

With no end in sight for the pandemic, it’s important for companies to remember that cash is king. Without access to on-hand liquidity, companies will be forced to sell to meet commitments. If that situation arises, it may be time to seek out a partner with a proven track record in execution, marketing, and sales. CARROLL’s portfolio through July has met 2020 NOI budgets, despite all the headwinds, putting us in a position as a much-needed lifeline for those that are over levered and facing distress if revenues continue to lag.

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