Real Assets Adviser

March 1, 2020: Vol. 7, Number 3

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From the Current Issue

The revolution in alternative product development

The recent increase in demand for alternative products has propelled investment professionals to open client portfolio doors previously considered locked. Changes in the alternative landscape have invited new sponsors and encouraged seasoned companies to provide more appealing products. The economy, meanwhile, continues its run on the longest expansion in history, helping to create a Golden Age of Investing.

REITs take on affordable housing problem

Housing Partnership Equity Trust (HPET) made its first acquisition in 2013, partnering with nonprofit Mercy Housing Inc. to acquire a low-rise 1970s-era apartment community that had become a neighborhood eyesore after years of neglect. After closing on the 128-unit property, located in a leafy, close-in Chicago suburb, HPET and Mercy Housing spent some $2 million to tackle a wide array of problems, from outdated energy and mechanical systems to peeling paint and mold.

5 Questions: Retail-to-warehouse conversions hit stride

Empty stores and shopping centers are increasingly being converted into warehouse and e-commerce distribution centers, according to real estate firms such as CBRE and Cushman & Wakefield. CBRE produced a report this past year detailing 24 retail-to-industrial conversion projects since 2016, turning 7.9 million square feet of retail space into 10.9 million square feet of new industrial space either by converting the existing retail structure or replacing it with new industrial construction. One of the observers of this trend has been Bil Ingraham, senior vice president of business development at Centennial.

The economic drag of housing costs

Housing is the world’s biggest investment class, with home prices more than quadrupling in real terms during the past 70 years, and yet the housing sector is damaging the U.S. and other developed economies around the world. Housing is simply too expensive and is suffocating other components of the economy.

Profile: Fred Fern, founder, CEO and chairman of Churchill Management Group

Many years ago, Fred Fern had some money burning a hole in his pocket. A family friend, a stockbroker at PaineWebber, suggested Fern invest the money and subsequently bought the young man shares of IBM, the bluest of blue-chip companies in those days. Fern recalls himself thinking at the time, “I am invested in IBM and have all the answers.”

Nontraded REITs complete banner year of fundraising

Sales of nontraded REITs totaled more than $4.2 billion in the fourth quarter of 2019, their ninth consecutive quarterly increase since fundraising hit a bottom in third quarter 2017, and their highest quarterly total in over five years. Nontraded REITs closed out 2019 with more than $11.8 billion raised, their highest fundraising total since 2014.

Single-family rental projects on the rise: Evolving demographics and preferences creating new opportunities for investors

As consumer preferences shift to embrace renting over homeownership, the purpose-built single-family residential (SFR) sector represents a potentially attractive investment opportunity. The need for rental properties is steadily growing, with 65 percent of new households electing to rent rather than buy. For residents, these properties combine the no-fuss maintenance of apartment living with the amenities of a single-family home. For investors seeking to participate in the residential market and looking to avoid the crowded multifamily sector, SFR communities offer attractive exit conditions, operational efficiency and consumer demand.

Intergenerational living: Some investors wonder if combining student and senior housing might make sense

Two of the hottest niches in real estate are at opposite ends of the housing spectrum — senior and student housing. According to NCREIF annualized data ending Sept. 30, 2019, senior housing performed better than all other sectors except industrial. The total annual return for senior housing through third-quarter 2019 was 7.8 percent, which compares favorably to the overall NCREIF Property Index’s (NPI) 6.24 percent return, as well as the 5.39 percent return posted for the apartment sector.

The infrastructure REIT opportunity: Massive investments will be required to usher the 5G era

Over the next decade, wireless applications powered by fifth-generation (5G) network technologies are expected to disrupt nearly every sector of the economy, requiring massive investments in communications infrastructure. Cell tower and data center owner/operators will be key beneficiaries of 5G-related spending, providing critical assets to carry economies into the next digital era.

Pot companies have turned into a real bummer for investors

So much for the argument that if marijuana is legalized everybody will be smoking dope, sitting on their sofas and playing video games. Far from it. Demand for cannabis has been underwhelming and investors are starting to figure out they’ve been on a bad high.

Apartment communities with fitness centers hit all-time high during past decade

Gyms and other fitness amenities are in demand from tenants, and real estate developers are offering a muscular response to that mandate. RENTCafe, a division of Yardi Matrix, has issued a report that found in 2019 some 92 percent of new rental buildings came with some type of gym or fitness amenity — and during the past decade gyms have been a regular fixture in around 90 percent of new apartment buildings.

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