2022 Reflection and 2023 Expectations
January 5, 2023
By Brennen Degner
Getting a chance to sit down and reflect on all that has happened in 2022 has been an enlightening experience. We often live our lives in such a day to day vacuum that it is easy to lose sight of how much has changed and what was accomplished over a year long period. Overall, 2022 was an overwhelmingly successful year for the DB team. I am proud of the growth I have seen from our team members, their deduction to the Mission, and most of all their ability to fight through adversity in a changing market. A big thank you and shout out to the teams at DB Capital, Peak Renovations and Redstone Residential that made 2022 such an overwhelming success.
I wouldn’t be speaking in true form if I didn’t focus my reflection on how and where we stand to make improvements. In the words of Ray Dalio, “pain plus reflection equals progress”, and 2022 came with a fair amount of pain. Similar to many of my peers we started off 2022 on an acquisitions high from Q4 2021 with ambitious expectations for 2022. With a healthy pipeline we saw the opportunity to continue growth at an exponential pace but could see choppiness in the waters ahead. Fundamentals in our markets were strong but it was clear that the capital markets tide was about to shift. Although we expected markets to change, we had been forecasting the same for years, I would be lying if I said we predicted the velocity and order of magnitude in which that change actually occurred.
Our Mission is, “to be the leading multifamily investment group in each of our focus markets and always exceed our client’s expectations”, and this year each day felt like a battle to fulfill that goal. When reviewing where our team can improve I always like to break things down into what is controllable vs. uncontrollable. We cannot control things like where interest rates are going, what supply chains look like, or whether or not our properties run the risk of being impacted by new supply; variables like that we can only mitigate through research and setting up a culture focused on data driven decision making. Things that are in our control are how we communicate as a team, how we build a culture of accountability, and how we develop systems aimed at reducing our margin of error on the uncontrollable variables to the lowest possible level. In 2022 as the latter part of the year slowed down, we had the opportunity to focus on shortcomings in our organization or bottlenecks that we felt were leading us away from our Mission.
We made major structural changes in how we track business plan progress, created alignment with management and construction teams that are responsible for a large part of the success of our projects, formed a strategic partnership with a management platform we knew would significantly improve operations, and we adjusted our organizational hierarchy to solve inefficiencies we saw in how we execute our projects. All this in an effort to continue to align ourselves with our Mission and build an organization that will not just withstand challenging markets but capitalize on them.
As we look out into 2023 we see opportunity on the horizon. We expect to continue to build on the growth seen in 2022, not just the growth of the portfolio but more importantly the growth and improvement in our operating platform. With the current capital markets environment we expect to see values continue to erode and provide an opportunity to enter deals at a more favorable basis than we saw in late 2021 and early 2022. Groups that bought during those periods, ourselves included, are going to need to execute or exceed their business plans to manage their way through this value deterioration. The days of buying a deal and making money because market rents grew and cap rates compressed are long gone at this point. We see overall competition for multifamily remaining high but dissipating as groups that are not well capitalized or struggling with the constant battle that under performing deals become are naturally removed from the market. However, if you can operate well and build dry powder for 2023 and 2024 we think there will be great deals to be made. Thanks for the read and best wishes for a successful 2023!