• Home
  • About Us
  • Contact
  • Your Account
  • Subscribe
No Result
View All Result
Tuesday, January 31, 2023
Alternatives Watch
  • Hedge Funds
    • Manager News
    • Mandates
    • Service Provider News
    • CTAs/Managed Futures
  • Private Equity
    • Manager News
    • Mandates
    • Service Provider News
  • Private Credit
    • Manager News
    • Mandates
    • Service Provider News
  • RE/Infrastructure
    • Manager News
    • Mandates
    • Service Provider News
  • Investor News
    • Endowments and Foundations
    • ESG
    • Pensions
    • Platforms
    • Consultants
  • Research
    • Investor Scorecard
    • Manager Scorecard
  • Subscribe
  • Log In
  • Hedge Funds
    • Manager News
    • Mandates
    • Service Provider News
    • CTAs/Managed Futures
  • Private Equity
    • Manager News
    • Mandates
    • Service Provider News
  • Private Credit
    • Manager News
    • Mandates
    • Service Provider News
  • RE/Infrastructure
    • Manager News
    • Mandates
    • Service Provider News
  • Investor News
    • Endowments and Foundations
    • ESG
    • Pensions
    • Platforms
    • Consultants
  • Research
    • Investor Scorecard
    • Manager Scorecard
  • Subscribe
  • Log In
No Result
View All Result
Alternatives Watch
No Result
View All Result

Real estate in demand as inflation drives real asset appeal

Susan BarretobySusan Barreto
May 24, 2021
in Consultants, Investor News, Pensions, Real Estate/Infrastructure
Real estate in demand as inflation drives real asset appeal

By twenty20photos/Envato Elements

ShareTweetShareSendSend

Those seeking inflation protection have often flocked to real assets, but it wasn’t until recently that inflation became a potential reality for institutional investors.

Specifically, within the real assets universe sits a diverse bucket of private investment strategies including industrial real estate, multi-family or data centers — and all of it rapidly gaining traction.

Consulting firm Verus in a recent report on real assets pointed out that while REITS and core real estate holdings ended 2020 in negative territory, specific sectors such as industrial and core real estate vintage funds are proving attractive as an inflation-fueled economic rebound is underway.

Verus’ analysis found that core real estate vintage funds have historically outperformed during recessionary years and early recovery periods (such as 2000-2003 and 2009-2012) as market dislocations created attractive entry valuations. Given the recent recession and market, current non-core vintages could be attractive, the firm said.

Real estate strategies were up 5.11% in the first quarter alone in 2021, after finishing up the previous 12 months with 5.61% in annualized gains, according to BNY Mellon U.S. Master Trust Universe.

Earlier this month, the $42 billion Connecticut Retirement Plans and Trust Funds (CRPTF) allocated to two real estate funds as part of its expanding real asset program.

Connecticut State Treasurer Shawn T. Wooden moved forward with commitments of up to $100 million in the Mesirow Financial Real Estate Value Fund IV and $50 million in the Penzance DC Real Estate Fund II.

“Going forward, the plan expects to continue making consistent allocations to real assets as part of the long-term strategic plan for the Connecticut Retirement Plans and Trust Funds,” said Wooden. “The role of real assets in the portfolio is to provide diversification, given the negative correlation with traditional asset classes, as well as stable income, modest appreciation and inflation hedging.”

The Connecticut Retirement Plans and Trust Funds currently has a target of 10% to real estate and 4% to infrastructure and natural resources with multi-year pacing plans to get to the respective targets for each of those sectors. 

Other public pension funds, including LACERA, are also increasing their commitments to real estate going forward as part of a broader move into less liquid strategies.

The most promising areas currently are in industrial and multi-family development that have both experienced record levels of new supply and new levels of demand, according to Verus.

Ares Real Estate Group, which is the process of acquiring Black Creek Group, said it believes the $2 trillion industrial real estate sector exhibits consistent fundamentals across diverse market cycles and is positioned to benefit from heightened institutional interest driven in part by secular tailwinds and the accelerated growth of e-commerce.

But as we all have been forced to work where we live, in addition to ordering more online, the other growth story has been in multi-family housing. It is also at the center of one of the biggest uncertainties of the post-COVID recovery in that no one quite knows for sure when and if ever the home office will be replaced with real physical corporate office.

High density urban areas such as New York and San Francisco saw office buildings at minimal capacity, and experts say that much of this has yet to be determined at many companies.

For David Hansel, managing partner at New Jersey-based real estate firm Lucern Capital Partners, his firm this past week closed on two multi-family assets in the Carolinas that put his firm’s strategy into the $100 million range.

The firm, which launched a vehicle last October with a focus on value-add and multi-family real estate, is now the largest multi-family owner in western Charlotte, North Carolina. Hansel describes a bustling market, where demand for housing is only growing more as the area is home to infrastructure projects, jobs and technology initiatives.

COVID-affected cities in the Northeast and in the Southeastern U.S. differently, he said. While the overall climate is colder in the north, the restrictions and density meant many younger people moved away from New York City and in search of more affordable accommodations.

While some have moved to the Sun Belt, others have relocated to places such as Philadelphia, which has the lowest cost of living out of the Northeast cities, according to Hansel. And following that exodus are investors and developers out of New York that have found a lot of good opportunities in the metro area for renovation and development.

Thanks to COVID, leasing velocity in Philadelphia was obliterated as fewer people were looking for rental units. By comparison, in the Carolinas there were waiting lists for renters, Hansel added.

While Lucern purchased a multi-family building in December, the firm is currently waiting on buying more in the area as the renters start to return.

The focus is on fundraising for now, as Hansel expects to welcome more investor capital soon as smaller investments in rapidly growing markets are often difficult to access for obvious reasons.

“Inflation will have a positive effect on our ability to raise capital,” Hansel said. Most of the firm’s investors have been retail historically, but down the road Hansel expects Lucern will attract more institutional capital.

But for now, inflation means that rents will increase and as they move up so does Lucern’s bottom line as an investor. And while housing prices move up during inflationary periods generally it also makes it harder for the younger generation to buy. This will likely mean many will rent for longer too, Hansel said.

“Pre-COVID there was a lack of supply for housing and due to COVID we are now really behind,” he added.

According to Verus, when it comes to REITs the investments in apartments are much lower than they were going into the global financial crisis. Meanwhile on the private real estate side, a greater percentage of capital is now going into apartments and industrial buildings.

Verus said clients without private exposures to alternative property types such as senior/student housing, single-family rentals and data centers may be underrepresenting them in their portfolios.

ShareTweetShareSendSend
Previous Post

Washington State Investment Board preps for new executive director

Next Post

Trump administration advisor appointed vice chair of Cerberus Global Investments

Related Posts

NY pension adds $1.2bn across PE, credit, HF and real estate programs
Pensions

NY pension adds $1.2bn across PE, credit, HF and real estate programs

Bridge collects $2.26bn for multifamily housing
Real Estate/Infrastructure

Bridge collects $2.26bn for multifamily housing

Texas fund allocates $90m to private markets, reviews annual plan
Pensions

Texas fund allocates $90m to private markets, reviews annual plan

Vision Ridge raises latest sustainable real assets fund
Real Estate/Infrastructure

Vision Ridge raises latest sustainable real assets fund

NJ DOI invests with existing alts managers
Pensions

NJ DOI invests with existing alts managers

Next Post
Trump administration advisor appointed vice chair of Cerberus Global Investments

Trump administration advisor appointed vice chair of Cerberus Global Investments

Log In/Out

Lost your password?

Search the AW Archives

No Result
View All Result

Recent News

Atalaya closes special opportunities fund at $1.8bn

Atalaya closes special opportunities fund at $1.8bn

NY pension adds $1.2bn across PE, credit, HF and real estate programs

NY pension adds $1.2bn across PE, credit, HF and real estate programs

Bridge collects $2.26bn for multifamily housing

Bridge collects $2.26bn for multifamily housing

AI hedge fund Castle Ridge builds success with multi-model system

AI hedge fund Castle Ridge builds success with multi-model system

Be an Alts Insider

Sign up for your FREE daily alts news briefing

Subscribe

Subscribe to AW
Alternatives Watch

© 2019-2022, All Rights Reserved  |  BMV Digital

Navigate Site

  • Hedge Funds
  • Private Equity
  • Private Credit
  • RE/Infrastructure
  • Investor News
  • Research
  • Subscribe
  • Log In

Follow Us

No Result
View All Result
  • Hedge Funds
    • Manager News
    • Mandates
    • Service Provider News
    • CTAs/Managed Futures
  • Private Equity
    • Manager News
    • Mandates
    • Service Provider News
  • Private Credit
    • Manager News
    • Mandates
    • Service Provider News
  • RE/Infrastructure
    • Manager News
    • Mandates
    • Service Provider News
  • Investor News
    • Endowments and Foundations
    • ESG
    • Pensions
    • Platforms
    • Consultants
  • Research
    • Investor Scorecard
    • Manager Scorecard
  • Subscribe
  • Log In

© 2019-2022, All Rights Reserved  |  BMV Digital

Be an alts insider

Start your days in the know with our free newsletter

No, I don't want to be an alts insider

Thank

You!

Follow us
on LinkedIn

Lost your password?

Cookie Consent
We do not use cookies on our website other than those that are strictly necessary for the website to function. By clicking “Accept”, you consent to the use of all six strictly necessary cookies.
Do not sell my personal information.
Cookie Settings Accept
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Save & Accept
Powered by CookieYes Logo