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14 Must Reads for Real Estate Investors (Dec. 13, 2023)

Alts firms that have historically catered to big investors and institutions, like KKR, Blackstone, Apollo and Ares, are all pursuing individual investors with new products, reports Forbes. The Wall Street Journal examined the tricky math involved in valuing private real estate funds. These are among the must reads from the real estate investment world.

  1. KKR and Alternatives Industry Race for Individual Investors “The rush for individuals investing into alternatives is accelerating. As institutional investors such as pension funds and endowments, many over-allocated to private equity, have paused some of their alternative investing amid rising rates and economic uncertainty, the big alternatives firms such as KKR, Blackstone, Apollo and Ares are intensifying their focus on individuals. And a special focus is on individual investors with assets of $1-5 million—this segment of US households has jumped nearly 60 percent, to 12.7 million, in the 15 years ending 2022, according to researcher CEG Insights.” (Forbes)
  2. U.S. REITs Narrow Gap Between Share Price, NAV in November “Publicly listed U.S. REIT stocks traded at a median 20.2% discount to their net asset values at the end of November, S&P Global Market Intelligence reported in its latest NAV Monitor, an improvement from a 28.4% discount a month earlier. The monitor tracks 129 REITs. It is preferable for REITs to trade at a premium compared to their NAVs, according to Seeking Alpha, because it creates an opportunity for the REITs to issue more shares. When shares drop below net asset value, REITs can sell assets and repurchase shares to reduce the difference in share price and net asset value.” (Bisnow)
  3. What’s a Real Estate Fund Worth? Depend on Who’s Doing the Math “The term “net asset value,” or NAV, is so commonplace for anyone buying a mutual fund, investors hardly give it a second thought. It has a standard definition. The number is audited annually. There is rarely a reason to question it. But in a corner of the market that has grown rapidly—real-estate funds—the NAV label, while ubiquitous, doesn’t have the same meaning. In most cases the funds, known as nontraded real estate-investment trusts, have broad leeway to define their NAV measurements however they want.” (The Wall Street Journal)
  4. Private markets ‘uniquely placed’ to benefit from mega-forces, says BlackRock “Conway said examples of this would include infrastructure’s role in the energy transition and areas of real estate buoyed by large-scale changes in demographics.” (CityWire Selector)
  5. Manhattan Leads U.S. in Office Mortgage Maturities “The challenges faced by the U.S. office sector are becoming increasingly more pronounced: According to a recent analysis by CommercialEdge, the commercial real estate data research division of Yardi, almost $150 billion in office building mortgages are set to mature by the end of 2024, with an even greater amount ($300 billion) set to mature by the end of 2026. Furthermore, an in-depth examination of more than 80,000 office properties accounting for $920 billion in mortgage debt revealed a concerning trend: Approximately 16.1% of loans by dollar volume are set to mature by the end of 2024, and this number is expected to rise to 32.7% by the end of 2026.” (Property Shark)
  6. New Legislation Proposes to Take Wall Street Out of the Housing Market “Wall Street entered the single-family rental market in the aftermath of the 2008 housing crisis, plucking up homes in foreclosure. Its influence has been growing ever since. By June 2022, institutional investors owned 3 percent of all single-family rentals nationwide, but in more affordable markets they owned a considerable market share; in Charlotte, they owned 20 percent, according to the Urban Institute.” (The New York Times)
  7. Billionaire Developer Pans Asset Managers Handing Keys to Banks “Billionaire Hussain Sajwani has long expected to see pain in the global commercial real estate market. He just didn’t expect it to get this bad. The founder and chairman of Dubai’s Damac Group said he’s been surprised by the spate of investors, some with more than $1 trillion in assets under management, who have defaulted on their loans in recent months. As a result, he said he’s seen property in prime locations selling for as little as 20 cents on the dollar.” (Bloomberg)
  8. How to Manage Portfolio Risk with Diversification in Real Estate “Real estate investing has always been seen as a lucrative avenue for wealth creation. However, like any investment, potential risks must always be factored into the equation. One effective strategy to mitigate these risks when it comes to real estate investing is through diversification. There are a few different ways that diversification can be interpreted when it comes to real estate investing so understanding these different avenues and capitalizing on each opportunity is important for investors. Portfolio diversification also leads to other benefits besides mitigating risk that investors will want to take advantage of.” (Mortgage Professional America)
  9. Why This RIA Thinks Sports Investing Is a Missed Opportunity “According to Pitchbook, 20 of the 30 teams in the NBA have PE connections, valued at an estimated $74.2 billion. Across all the leagues, 63 sports teams, valued at $234.3 billion, have PE connections.” (RIA Intel)
  10. ‘The Stadium Is Secondary’: How U.S. Sports Teams Became Real Estate Speculators “Mixed-use developments where people can live, work, shop, dine, drink and play have become ubiquitous as teams seek to squeeze as much profit as possible from their land. The old paradigm was to build a new stadium with high-end facilities inside to cater to the corporate set, boosting matchday income and attracting showpiece events such as Super Bowls, World Cup games and blockbuster concerts by stars like Swift. Now teams also want to dictate how dollars are spent each day in the streets around their venues, a trend turning billionaire sports owners into influential city planners.” (The Guardian)
  11. Why alternative investments are important for a well-balanced portfolio “Alternative strategies may be a good diversification strategy to distribute risk in a portfolio. In fact, research from UBS, Dexia Asset Management and Wheelhouse Partners has indicated incorporating alternatives may improve the risk-return metrics for certain portfolios.” (LiveWire)
  12. General Atlantic files for IPO in U.S. “General Atlantic, the alternative investment firm whose bets have included Facebook and Airbnb, has confidentially filed for an initial public offering, people familiar with the matter said.” (Pensions & Investments)
  13. Why Macy's real estate portfolio is the focus in buyout “While brick and mortar retail stores have faced an uphill battle in recent years, at the center of interest for most investors is Macy's real estate portfolio, which contains the crown jewel, New York City's iconic Herald Square location.” (Yahoo! Finance)
  14. Renters Are Starting to Get Concessions From Landlords Again “Concessions have been especially prevalent in the most overbuilt Sunbelt markets, but they are on the rise in the majority of major metro areas. About one-third of apartment and home-rental listings this October included some type of markdown, according to an analysis of rental listings by real-estate firm Zillow.” (The Wall Street Journal)
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