Quick Take: Origin’s IncomePlus Fund has outperformed competitors in recent years during a volatile real estate market. The Fund’s adaptable, all-weather strategy has safeguarded returns and protected investors during downturns. With strong tailwinds for multifamily investments in 2025, including slowing supply and rent growth potential, the Fund is positioned to capture potential opportunities.
The past five years have marked a highly volatile period in real estate. Expenses rose, cap rates increased, and interest rates shot up dramatically. According to the Green Street property index, as of early March, apartment values had declined 20% from their 2022 peak. Considering this turbulence, how has Origin’s IncomePlus Fund performed?
IncomePlus Fund Strategy: A Resilient Investment Approach
Since its launch in February 2019, the IncomePlus Fund has maintained uninterrupted distributions, and 95% of monthly returns have been positive. Over the past three years, it has consistently outperformed many of our competitors with similar offerings (see chart below). Early in the Fund’s history, it performed relatively in line with these competitors, as illustrated in the trailing five-year data. But its ability to mitigate risk during recent market instability has set it apart.
Notes: As of 12/31/24. Returns are for the INV share class; actual individual investor performance may differ based on share class. Total returns reflected are net of fund fees and assume monthly reinvestment of distributions. Non-Traded REITS reflect seven of the industry’s largest non-traded REITs that provide publicly available performance reporting. Origin has not separately verified accuracy of the performance data with each third-party issuer. Returns are not guaranteed. Past performance is no guarantee of future results. All investments involve a degree of risk, including the risk of loss.
How the IncomePlus Fund Outperformed Competitors
We built the IncomePlus Fund’s “all-weather” strategy to capture potential gains while providing protection in downturns. Here’s how.
Portfolio construction and strategy: Our portfolio design emphasizes flexibility across preferred equity, direct investment and direct development opportunities. This adaptability allows us to identify resilient markets and projects with strong potential.
We focus exclusively on multifamily, which has the highest return for the lowest level of risk compared with other real estate classes, according to the NCREIF Property Index. Housing is also an essential asset. The properties we acquire are all less than 10 years old to preserve intrinsic value and ensure operational efficiency, with a concentration in the Sunbelt markets. These high-growth regions benefit from sustained demand driven by population and job growth.
Strategy that adapts to market realities: When we launched the Fund in 2018, the portfolio was 30% preferred equity and 70% direct investment. However, with the onset of the COVID-19 pandemic in 2020, we decided that killing our pipeline of deals was the most responsible decision. We pivoted to prioritize preferred equity positions.
Risk Mitigation Through Strategic Allocation
Over the past three years, we continued to transition the portfolio to preferred equity positions, given that the cost of capital for direct acquisitions didn’t meet our standards during this time. We also introduced direct development, which offered potential for a healthy margin.
Although existing assets faced challenges from rising interest rates and increased supply, our direct development investments managed to retain equity, absorbing only profit reductions. This strategic balance has protected overall Fund performance during turbulent times.
Disciplined Investment Decisions
Our disciplined approach is designed to avoid overpaying for assets in inflated markets. Since 2020, we have not invested in stabilized properties, a prudent decision given the subsequent 20%-30% value decline in such assets by 2023-24. Instead, we deployed capital into preferred equity deals in which the Fund’s equity sits in a protected position within the capital structure and is entitled to a priority return relative to common equity.
Capitalizing on Market Shifts
The IncomePlus Fund has provided reliable returns during one of the most turbulent periods for real estate in recent memory due to our Fund strategy and disciplined decision-making. Now, the Fund is actively shifting its strategy to have less weight in preferred equity and more in operational assets and direct ground-up development. This transition is driven by Origin’s view that market conditions are improving, creating an opportunity to capitalize on appreciation in addition to focusing on income stability.
Now is the Time to Invest in Multifamily
Looking ahead, we see strong tailwinds for multifamily and believe that 2025 will be one of the best vintages for real estate in the past 15 years. A significant factor is the anticipated slowdown in housing supply, which could drive rental rate growth. For example, Origin’s proprietary Multilytics® rent-forecasting model projects notable rent increases over the next five years.
Another tailwind we see is affordability. High interest rates have put homeownership out of reach for many, leaving more people renting for longer. Furthermore, public markets, often a precursor to private market trends, have shown a recovery of 20% to 30% from their lows, signaling positive momentum.
We know that recent market movements have caused some uneasiness among investors. We believe investment diversification is important, and we believe that now is a good time to consider adding real estate to your portfolio. Please don’t hesitate to schedule a call with our investor relations team if you’d like to discuss further.
