Dec. 2016

Investment Fashionistas: 2017 Real Estate is the “New Black”

In fashion, everything wants to be the “new black,” as black has, is, and will always be in fashion.

To achieve this ubiquity and sustainability, it comes down to achieving some basic investing principles: performance, transparency and an understandable, consistent investment process.

In fashion, very few things remain stable, but some things have. The black turtleneck that AAPL’s Steve Jobs sported, the classic little black dress, the black tie event, and Coco Chanel’s little black jacket.

Today, the bond market is volatile and interest rates are anticipated to rise, causing further turmoil. Equities are at their all-time high, and the consensus is that they will continue to climb, but we’re also advised to hold onto our seats.

Investors of all types (sovereigns, publics, corporates, family offices, endowments and foundations, RIAs, qualifieds, accrediteds and the mass affluent) are seeking current income (think dividends or clipping coupons) and capital appreciation (think rising values of underlying securities), but are not consistently finding what they want. Low interest rates have killed most investor access to yield and inconsistency (look at the rise of small caps Q416) to buy and hold stocks—even those “more boring” dividend yielding stocks.

Real estate is something you can see, touch, photograph, weighs way more than you do, is sturdy enough to be referred to as a “hard asset” class, and may be this years “black.”

The best investors balance and diversify their portfolios across asset classes. I do NOT encourage anyone to sell their ETFs, stocks or bonds to run and buy real estate. It is just hard not to have some in your portfolio.

Real Estate across subsectors (multifamily, commercial, industrial, retail, senior, hospitality, mixed use) was decimated during the great recession of 2008. Today, it has exceeded other asset classes in its return to highs, and in many cases, continued to pay dividends even in the darkest hours. I am not talking about single family homes, condos and vacation homes that were purchased at the top, went underwater and could not sustain themselves. I am talking private equity real estate, investing with strong developers, organizations from $50 million in investments to those with billions, professional investors.

We are assisting leading developers, private equity firms and other funds; real estate in many structures and subsectors raise assets under management or capital, at scale. Of course, we do not work with every firm that can write us a check. We screen and interview them as they do us to determine that they are good at what they do, consistently delivering yield and ultimately strong IRRS. Once together, we have worked with this asset class to achieve its goals, growing with its opportunity set, We aim to deliver current income and long-term capital appreciation that add up to strong IRRs and outcomes for all parties from independent RIAs and consultants, to the families’ who assets are ultimately being invested.

For this, we are pleased with our 2016 results and anticipate 2017 as more than just promising times.


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