Real Assets Adviser

April 1, 2021: Vol. 8, Number 4

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From the Current Issue

The revolution in industrial real estate has only just begun

The recent migration of jobs and people from coastal gateway metros to secondary markets in the south and west has generated much discussion in the commercial property market. At the same time there has been a less discussed shift in demand on the investment level, from office and retail toward industrial.

Keep me at home: A worrisome trend for senior housing investors

Even as the share of U.S. population over age 65 has grown steadily since the 1980s, the share of low-income seniors living in nursing homes has declined sharply. That’s the conclusion from a new research study from the University of Wisconsin, which found the trend, to some extent, is being driven by an increasingly diverse population of Hispanic, black, Asian and Native American people, who are more likely to live with an adult child or other caregiver than non-Hispanic whites. In short, they have cultural preferences for multigenerational households.

5 Questions: The prognosis for medical office

The real estate investment business is rich with niche investment opportunities, and one of the best among them in recent years has been medical office buildings. MOBs, as they are often referred to, have recorded consistent growth and the outlook remains strong. Among the avid observers and participants in the MOB investment trend is J. Brannen Edge, CEO of Flagship Healthcare Trust.

3D printing capabilities moving to the front lines

If you’ve been wondering if 3D printing will live up to its advertising and is worthy of a place in your portfolio, you will be interested to know the emerging sector just got a couple votes of confidence. One vote of confidence comes from the U.S. Department of Defense, the other from ARK Investment Management, whose thematic and actively managed ETFs have been the talk of the investment world, some of which racked up 100-plus-percent returns this past year.

Profile: Jamie Price, president and CEO, Advisor Group

There were two parental “mandatories” in life that Jamie Price and his three brothers were required to fulfill: One was the requirement to get a college education in any course of study they were passionate about, and the second was to take four years of speech in high school. Price admits to resenting his parents for the latter mandate, only to realize during his professional career the enormous value the speech classes provided by building his confidence and enhancing his leadership capabilities.

Core storage: Self-storage outperformance gains notice during pandemic

COVID-19 has firmly cemented self-storage’s place in the conversation about core real estate property sectors. Within the past decade, the rapid growth in self-storage inventory reflects not only strong growth in use among the overall population, but also strong and growing investment interest from public and private investors. The sector boasts enviable attributes, resulting in net operating income (NOI) growth with modest volatility and total returns that have exceeded each of the four major core property types for nearly 15 years. These superior investment returns have been aided by the sector’s high operating margins and limited ongoing capital expenditure requirements. Furthermore, superior rent-roll diversification mitigates single-tenant credit risk, while inelastic demand from sticky tenants and modest relative supply have helped contribute to landlord pricing power and long-term NOI growth. Although many of these attributes have been widely recognized over the past decade, the COVID-19 pandemic has highlighted the sector’s recession-resistant attributes less familiar to many investors.

When Mother Nature messed with Texas: Lessons learned from the Lone Star State

It’s a well-known fact here in the western hemisphere that one does not mess with Texas. Unless, of course, you are Mother Nature, who delivered a crippling snowstorm in February that brought the electrical grid in Texas to the brink of collapse. In what is destined to become a Gerard Butler movie, Texas was a mere 4 minutes and 37 seconds from a full shutdown of the grid, from which it would have taken weeks, if not months, to recover. Instead, rolling blackouts and voluntary shutdowns lowered the load on the grid enough to allow recovery.

The current and coming era of intelligent buildings

Let’s start with a simple analogy: the automobile was always a fairly sophisticated piece of machinery, with an engine made more powerful and efficient over the years. But it wasn’t until automakers started packing their vehicles with sensors and computer chips that they became truly intelligent and offered drivers an array of capabilities. Today, many advanced vehicles run on electric rather than combustion engines, and some can even take passengers from point A to point B autonomously. The average car has 30 to 50 microprocessors on board, and high-end cars have as many as 100, and they are accompanied by 60 to 100 electronic sensors.

Falling short: Q4 fundraising down versus previous quarter and Q4 2019

According to the FundTracker database, infrastructure fundraising in fourth quarter lagged third quarter, though 12 funds raised more than $15.7 billion in equity capital. In third quarter, $15.9 billion was raised through seven fund closings. But fourth quarter 2020 fundraising was far short of the $41.1 billion raised a year ago in fourth quarter 2019.

Beam me down, Scotty: Pentagon and European space-based solar projects making strides

Though it sounds like science fiction, scientists working on behalf of the Pentagon have successfully collected solar energy in outer space and beamed it back to Earth. A panel the size of a pizza box, known as a photovoltaic radiofrequency antenna module (PRAM), was first launched in May 2020, attached to the Pentagon’s X-37B unmanned drone, to harness light from the sun and convert it to electricity, according to a CNN report.

The distress around distressed debt funds

The COVID-19 pandemic has introduced dislocation within real estate markets, and lending markets have experienced some shake-ups. That has meant potential debt-investment opportunities. “The current commercial real estate lending market is favorable and offers attractive risk-adjusted returns for investors who are well capitalized and able to respond nimbly to what we expect will be an evolving opportunity set,” says Matt Salem, partner and head of KKR’s real estate credit business. In mid-autumn 2020, the Federal Open Market Committee warned small- and medium-size banks could face stress from defaults on loans to commercial real estate if consumers continued to avoid traveling and shopping. That was also a concern for the real estate debt–fund industry; in the aftermath of the great financial crisis, more stringent banking regulations were put in place, and since then, banks have been underwriting the most secure property loans. In short, the banks had the best pricing and the best transactions. So, if the banks were stressed, where does that leave other types of lenders?

Data centers going green

It wasn’t very long ago that a data center was simply a corner cubicle where an employee input data into the company’s database — which was often just multiple excel worksheets or perhaps the buggy Filemaker program — for eight hours a day. If anyone needed that data, they had to ask the data inputter to find the appropriate pages, print them off and deliver them to the requester. Rarely was this accomplished within the hour or even several hours. If it was an external request, those pages had to be faxed or mailed. Things moved at a slower pace in those days.

Cryptocurrencies: capturing the attention and ambitions of world governments

Investor interest in bitcoin and other cryptocurrencies have not gone unnoticed by governments, including the United States. Jerome Powell said the Federal Reserve is seriously considering creating a digital dollar that would exist alongside the traditional dollar. The European Central Bank chief wants to do the same for the euro. In fact, a recent survey found 86 percent of central banks are exploring the idea, according to a report by Fareed Zakaria on The Global Public Square.

Gold, silver, bitcoin: Investors keep an eye on safe havens as governments gorge on debt

The economic landscape for gold is becoming more complex, as bitcoin competes with gold for safe-haven status. As the U.S. Federal Reserve Bank and other central banks pursue monetary policies and growing their balance sheets to record levels, the threat of global currency debasement is real, according to some observers, leading some investors to seek safe havens such as gold and bitcoin. The issue might not be whether gold or bitcoin is a safer haven, because any alternative asset that will protect wealth will become a necessity if purchasing power begins to flag.

Evidence mounts that inflation is gathering momentum

Evidence appears to be mounting that inflation is on the horizon, in part because of massive deficit spending in the United States and Europe to stave off economic damage inflicted by the coronavirus pandemic and partial economic shutdown. U.S. economists have expressed concern around President Joe Biden’s $1.9 trillion stimulus plan and the $1,400 checks that will be received by most citizens. The ensuing spending surge could set the economy on full boil and drive prices skyward and create a broader economic disruption. That expenditure would come on top of the trillions spent by euro zone governments to underwrite companies and jobs so they can survive the pandemic.

Wanted: A real energy revolution

You know the world is changing when the American Petroleum Institute finally capitulates and signals its support for setting a price on carbon emissions, thus lending support to the global effort to curb climate change. Of course, API, one of the most powerful trade associations in Washington, came to this point kicking and screaming. It has long earned its daily bread by supporting the fossil fuel industry through good times and bad, as well as through honest and duplicitous times.

Brace yourselves: Pandemics may become a fixture in our daily lives

It’s been a year now since Institutional Real Estate, Inc. produced its last live face-to-face event, its VIP (Visions, Insights, Perspectives) Europe program, conducted at the Hotel Arts in Barcelona, Spain. One of our keynotes for that event was Chris Kutarna, an Oxford Adult Education scholar and professor and co-author of the bestselling nonfiction book, The Age of Discovery. In the book, Kutarna draws parallels between what was going on during the Renaissance in Europe at the time of Michelangelo, and what is going on in our world today.

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