When investors review their portfolios, checking to see what is working and what is not, sometimes they look around to see what the heavyweights in investing are doing—the “Big Dogs,” if you will. Here are a few ideas to pique your interest.
Family Offices, those managers who are working with millions of dollars in investments, are beginning to shrink their exposure to hedge funds, bonds and equities and instead are eyeing real estate as a viable place to put more of their funds.
Warehouses, industrial buildings, medical offices and data centers are hot items right now in investing. If you hear “real estate,” don’t think single family homes. No, think instead of apartment buildings, new co-living buildings, and other commercial structures.
The balance of funds is shifting. Portfolios that include hedge funds are now allocating only about 4.5% of their investment pie to this asset. On the other hand, 17% is being shoveled into real estate. Projects like self-storage units or senior living apartments see a bright future ahead and have shown themselves to be “recession-resistant,” causing more and more investors to look with interest into these projects.
These types of investments are for patient people and for those willing to wait for gratification. They are also good for people who are wanting cash flow during the time they hold these investments, which can be accomplished with rents income, for example.
Camden Wealth reports that close to 20% of family offices in North America will likely be raising their real estate allocations on a net basis in 2020. Real estate generated an average return of 11% in 2019 and among domestic family offices, commercial real estate made up 56% of their real estate investments. There is definitely a trend here.
Heavy hitters with offices in New York, Miami and Switzerland are focusing on co-living and micro-apartments as they see the trend in a “shared environment” taking off and gathering speed. This is on the heels of W5 Group that recently bought into a 315,000 sq.-ft. mixed use building in Washington DC, which will dedicate one-third of that building to co-living spaces.
High-quality real estate in the right place at the right time will probably weather any potential downturn in the economy (and don’t fool yourself, many are preparing for that possibility).
Also important, is having the right partners with you in this Big Dog arena. Look for a good-sized management firm that can do its own vetting of the projects; that has access to sponsors who are looking for your kind of investments; that emulates loyalty to their clients; that operates with integrity and follows strict codes of morality. The bigger the fund management, the more likely it will be that they practice direct investing into real estate assets, rather than into REIT or real estate funds. In other words, when it comes to a fund manager, you want a Rottweiler to be your friend, not a Bichon Frise.
In the end, it’s all about relationships. You have to be comfortable and make a good “fit” with your investment manager. Talk to us at Paradyme; we have the size, the talent, and the good sense to help you make the most of your investments so that you can use it now and also leave a legacy for future generations. We sit and retrieve very nicely, too
