Investor Update June 2025
June 18, 2025
MACROECONOMIC CROSSCURRENTS
The early months of 2025 have seen sharp macroeconomic shifts. The ECB cut rates to 2.25% amid growing economic weakness, while the U.S. Federal Reserve has held firm despite clear signs of a slowdown. Chairman Powell’s reluctance to ease has been seen as reactive, raising the likelihood of more frequent rate cuts later in the year.
Our projection of four rate cuts in 2025—once aggressive—is now in line with broader market consensus. Meanwhile, long-end Treasury yields have risen due to broad deleveraging by hedge funds and banks, prompting speculation that the Fed may reintroduce QE under the guise of yield curve stabilization. This could drive the U.S. dollar lower.
Despite ongoing de-dollarization narratives, we view these concerns as overblown; no credible alternative reserve currency currently exists. For example, meaningful yuan adoption would require China to open its capital account—an unlikely and risky move.
Against this backdrop, we now assign a greater than 60% probability to a U.S. recession within 12 months, absent a resolution to trade tensions. If a recession hits in the second half, we expect unemployment to rise modestly (2–3 pts) followed by a Fed pivot. Historically, such conditions—falling rates, weaker dollar, and lower treasury yields—have created attractive long-term entry points for residential real estate investors.
With diverging central bank policies and rising geopolitical tensions reshaping market expectations, often more quickly than policymakers can adapt, headwinds and select opportunities are appearing for disciplined capital allocators. Since inception, Bridge Tower has remained committed to staying calm, focused, and operationally efficient—regardless of broader market conditions. Dislocations continue to create opportunities, and we approach them with long-term conviction and disciplined execution.
HOUSING & CAPITAL MARKETS
With over 80% of U.S. mortgages locked in below 6%, resale supply remains constrained despite softening prices. This “lock- in effect” continues to boost demand for build-to-rent (BTR) and single-family rental (SFR) properties. Meanwhile, a weaker dollar—down ~10% year-over-year—has revived foreign investor interest, especially from Asia, as buyers take advantage of improved FX conditions to target stabilized, cash-flowing assets in Sunbelt markets.
BTR remains resilient even in a downturn, benefiting from a stable, suburban tenant base and lower turnover. Historical performance, including steady SFR rents during the 2008 crisis, reinforces its value as a defensive play within residential real estate.
Highlights
“Those with vision, resources, and conviction are best equipped to seize meaningful upside and long-term opportunity—and we look forward to continuing to grow our footprint in the BTR space.”
– Dr. George Huang, Ph.D., CFA | Managing Partner
INVESTOR OUTLOOK
Our forward-looking strategy is positioned to capitalize on long-term housing demand
MARKET TRENDS
Despite tighter capital markets, demand for single-family rentals remains strong in growth corridors
________
We’re excited to share a new
opportunity to invest
alongside us through BT
Select Fund VI, created to
meet the ever-growing
institutional demand for
BTR housing.
Preferred Shares, targeting
a 10% annual return with no
profit-sharing for stable,
fixed-income-like exposure.
Common Shares, which
provide a 7% annual
dividend plus a 70/30 profit
split for those seeking both
income and upside
potential.
BUILDING & OPERATING THROUGH VOLATILITY
As population growth and household formation continue, institutional investors increasingly view BTR as a scalable, family- friendly alternative to traditional multifamily. Unlike apartments, which can be over-amenitized and lack functionality, BTR communities offer the space, privacy, and livability today’s renters are seeking. This shift reinforces our conviction in the enduring value of well-designed Bridge Tower BTR assets.
Due to our ongoing optimism about the U.S. real estate market and confidence in the long-term potential of build-to-rent (BTR), we’re excited to share a new opportunity to invest alongside us through BT Select Fund VI, created to meet the ever-growing institutional demand for BTR housing. The fund is structured as a diversified vehicle, deploying capital across multiple BTR projects in Texas and other high-growth markets. This approach offers exposure to a broader portfolio while helping mitigate single-asset risk and capture long-term upside in the sector.
To accommodate varying investor goals, we offer two share classes: Preferred Shares, targeting a 10% annual return with no profit-sharing for stable, fixed-income-like exposure, and Common Shares, which provide a 7% annual dividend plus a 70/30 profit split for those seeking both income and upside potential. Those with vision, resources, and conviction are best equipped to seize meaningful upside and long-term opportunity and we look forward to continuing to grow our footprint in the BTR space.
Stay Connected
If you’re interested in making another investment with Bridge Tower or know of another accredited investor who would like to learn more about these opportunities, please reach out to us at partners@bridgetowergp.com
ESCALATING TARIFFS IMPACT ON US ECONOMY & THE HOUSING SECTOR
Following rapid policy shifts, U.S. tariffs have risen to an effective rate of 10–15%, a sharp jump from the prior 2%, though still below the initially projected 25% on “Liberation Day”.
Tariffs policy has become a key driver of market uncertainty. If fully passed to consumers, it could raise CPI by 1–2%, temporarily eroding real wages and softening demand. As a result, businesses will slow investment and consumers will pull back spending through the remainder of 2025, absent a resolution of the trade war.
Looking ahead, the impact on residential housing is twofold: lower mortgage rates—potentially dropping below 5% by early 2026—are expected to revive demand, especially in underserved segments, while recession-driven rate cuts typically boost institutional interest in housing as a defensive asset. Combined with ongoing supply-demand imbalances, these trends continue to support our BTR strategy.
• Higher Construction Costs: Tariffs are projected to add ~$10,000 per home, compressing builder margins amid already tight affordability—challenging, but manageable.
• Better Cost Control: Slower construction starts have improved our negotiating leverage with subcontractors and suppliers, helping offset some of the cost pressures.
• Pragmatic Positioning: While we oppose protectionism, our focus remains on likely outcomes and financial impacts, with disciplined cost management guiding our response.
Metric (12-mo. view)
Bridge Tower Base-Case
Rationale
30-yr fixed mortgage rate
Peaks near 7% mid-year, glides to ~6% by Q4
Fed easing + possible QE
National home-price index
0 – 3% move
Tight inventory offsets weaker demand
SFR/BTR rent growth
+2 – 4%
Household formation slows, but rental demand remains steady amid high ownership costs
SFR/BTR sector health
Outperform
Sector fundamentals poised to strengthen in 2026/2027
IMPORTANT LEGAL NOTICE
This communication and the information contained herein are confidential and proprietary to Bridge Tower Partners, GP, LP (together with its affiliates, “Bridge Tower”, “we”, “our” or “us”) and are being provided to the recipient by Bridge Tower upon the request of the recipient in confidence on the understanding that the recipient will observe and comply with the terms and conditions set forth in this paragraph and the following paragraphs. By accepting this communication, the recipient agrees that the information contained herein is for the exclusive use of the recipient and, without the prior written consent of Bridge Tower, the recipient shall not (i) copy, distribute, make available or otherwise disclose any information in this communication to other parties, or (ii) use such information for any purpose other than the specific purpose of evaluating a potential investment opportunity with Bridge Tower or learning more about Bridge Tower. This communication must be returned to Bridge Tower upon Bridge Tower’s request. Notwithstanding the foregoing, the recipient of this communication may disclose to any and all persons, without limitation of any kind, the tax structure and tax treatment of any investment opportunity with Bridge Tower and all related materials of any kind that are provided to the recipient.
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