The real estate industry has gone through monumental changes in recent decades, and the continued evolution of the business is only accelerating. One of the professionals sitting in the vortex is David Kasprzak, executive vice president and chief business development officer at Broadstone.

How have real estate’s property types evolved over the past 10 years, and which currently
holds the most promise?

The landscape has changed dramatically. Ten years ago standard fare included offices, malls, strip plazas and multifamily. Today, multifamily remains incredibly attractive, along with net lease, medical, industrial/warehouse and infrastructure. Despite a long-term horizon, even agriculture/farmland is in play. Retail comes into and out of favor on what seems to be a monthly basis. Single-family residential rentals were popular for a few years but require incredible scale for success. The beauty of real estate asset management is that while opportunities shift, the asset class remains evergreen.

How has this era of fee compression affected real estate asset management?

Some real estate organizations have been fortunate enough to operate under a lower fee structure and have not felt the compression crunch as much as others. Technological advances and operational efficiencies should help managers stay competitive in this environment of falling fees. Some of the old-guard managers may complain, as they grew up in the heyday of public nontraded REITs with a standard model of quick growth, high-commissioned shares, followed by an IPO — a round-trip of fees. That model has since passed, much to the advantage of advisers and investors. The objective is to work smarter and with greater efficiency, creating value for investors. Fund sponsors continue to seek fund structures that provide value to themselves and investors alike.

Recently, there has been a surge in NAV and interval fund launches. Why is the interval fund structure so attractive to sponsors, advisers and investors?

A multibillion-dollar question. While sponsors and investors act like the interval fund structure is out-of-the-box-new, it has been around for decades, yet was not as attractive as other product structures, such as public nontraded funds. Once that well started to dry, demand from advisers for alternative products with a measure of liquidity drove sponsors to seek new fund structures. Not only did sponsors find that interval funds offered a flexible structure for asset and portfolio management purposes, it also addressed sales and marketing needs. Need to pay commissions to broker-dealers? No problem, with a fully-loaded share class. Is a sponsor focusing on distribution to RIAs? Offer an I-Share class. Advisers and clients can access high-quality institutional asset managers via a 40-Act fund, although education on liquidity provisions remains essential.

What are the biggest challenges facing real estate asset managers today?

Asset managers have been experiencing a high level of competition for deals across property types for years. While a challenge across the industry, this offers disciplined managers an opportunity to shine. Showing off your discipline throughout market cycles is an ideal way to demonstrate to investors that your asset class is open for business regardless of where we are in the cycle. Playing the long game, not just the current cycle, is key to success. Avoid the trends and be true to your discipline.

Will the real estate asset management business continue to consolidate?

It appears that consolidation will continue throughout the financial services industry, including real estate asset management. Asset managers, public and private, are being rolled up into larger firms or are merging regularly. Many factors drive this: expenses, market cycle and compliance challenges. Unprecedented investment by private equity firms into the financial services arena has driven a large measure of the activity. This pushes asset managers to rethink their business, drives innovation and creates opportunity. The consolidation will continue until it stops. This sounds like a statement of the obvious, but is actually more of a statement on the environment of consolidation in the real estate asset management industry.