If you had $100M where would you invest it today ? Real estate only
How would you answer this typical interview question right now? Core, value add, opportunistic ... particular asset class?
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Tesla.
Single family housing
.
Even Blackstone is getting in on that now
I wouldn't invest it right now, still gotta see how COVID shakes out.
idk, I'd be pretty worried if you said that in an interview
Yeah, with JPOW going brrrrrrrr, it's a massive seller's market.
wait for S&P and the Nsadaq to drop even more in the next few weeks, both too high right now. once they drop invest in index funds tracking both.
Data Center REITs
.
Do you have any ones you particularly like?
I'm in DLR
Why are data centers attractive?
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Hi, I will invest for CRE at Houston!
Why Houston? Which asset class' prices are depressed there?
Data Centers / Industrial properties
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On the one hand, you want to wait and see how things shake out given the uncertain macro backdrop. If you have to put the money out today though, it's a safe bet to point to sectors that are experiencing secular tailwinds, which in turn lead to long-term out-performance: logistics, life sciences, rentals, and technology (data centers, cell towers, etc.) to name a few. You can dig into a specific sub-sector or market depending on your familiarity and experience, e.g. single-family rentals in the Sun Belt or life science buildings in secondary hubs. Definitely research the company you're interviewing with and see what they've been buying so you can somewhat tailor your answer.
Sun Belt trailer parks with low leverage and cheap ass agency debt.
Was thinking of this and/or manufactured housing.
Agreed.
Everything thinks I'm fucking around when I bring up MHCs/RV campgrounds but they have the most defensible fundamentals of any residential subgroup.
However, much of that is priced in as valuations for institutional-quality assets have been pushed through the roof in recent years.
I'd put 60% LTC on them bitches, and count my mailbox money from my house in Montana. Them summbitches stay full. $250m is a nice little portfolio that lets you buy quality parks and have professional management (not interested in being a slum lord). Strong liquidity from institutional players at that scale if you have to exit.
Data centres, mid-tier rental units and suburban co-working
I would sit on it for 3 more months to see how it shakes out and start going after distressed hotels or I would find a HUD qualified partner and start going after stalled MF deals that have HUD unqualified sponsors
I would’ve put a lot of it into Hannon Armstrong’s stock. I also feel that if another half of that was kept in cash to pounce on distressed real estate in core markets or REITs that were heavily discounted like Welltower, you’d make decent returns thats worth the headache right now.
Silverstein buying the US bank building in LA for $400 PSF is an example of distressed real estate in a core market (downtown LA as a whole is “distressed” but will flourish in the long term). Who in their right mind wouldn’t make that bet?
What's your downtown LA thesis?
Everyone I know that lives in LA would do anything/everything in their power to spend as little time there as possible.
I have a feeling they’ll have no problem selling that for more than they bought it for. Especially since the Olympics will be here in no time and it’ll be huge for LA.
Temperature-controlled warehousing like Americold.
cold storage or any last mile related industrial. maybe LIHTC apartments give some downside protection with good upside in the current environment. also GSE leased buildings with 15 to 20 year leases if you are fine with a core return profile (renewal rate is close to 90%).
Lol at LIHTC having downside protection. Who do you think is out of work right now?
Automotive retail, specifically new dealers and preferably the public dealers or larger auto groups with 5+ stores. Good performing stores can cash flow like crazy in the US. Solid returns on 20 year leases but can be a bit of a headache come renewal time.
The jury is still out on AVs for now, but one thing that's undeniable is that cars are going to be increasingly high tech, and service shops might not be well equipped enough to service them, so that's another solid revenue stream for dealers (a lot of which make most of their profit from service anyway).
Senegal Brothels
Secondary or suburban market flex industrial space at favourable valuations in Canada at the moment.
Flex industrial obviously carries with it a bit more risk, and is less appealing to e-commerce players, but my firm is looking at current valuations and they look to be solid. The long term outlook is looking at modest growth and my firm has set aside a good chunk of capital to purchasing these assets in secondary areas of BC, Ontario & Quebec. The LP capital raise has gone quite well with commitments flowing in.
Another area of focus is the acquisitions of independent senior living apartments (i.e. just apartments for seniors - no extra care). For obvious reasons we see this as a good investment area going forward. We specifically target suburban areas in and around tier 1 Canadian cities.
I'd preferably spread it out between SE industrial/flex office, urban infill multifamily that isn't a high rise, and smaller creative office space.
I like Eastside Seattle multifamily. Great income to rent ratios, Microsoft/Amazon poised for long term growth, and a movement east for many firms in downtown.
We've been crushing it over there.
I’d probably look at the rings of undeveloped land surrounding major cities. Usually you can buy acreage for super cheap. The population is only going up in most cities so if you’re young enough, and have a boatload of acres around 10 different cities, your bound to strike gold.
100% Project Based Section 8. No downside. No real collection risk. Just need a competent project manager.
This is the way. Although yields are super compressed at the moment.
For sure. But I have $100mm... if I can generate a 6 cap and lever that up to a 8% IRR, with no downside risk (effectively)? Why the hell do I care about yield; I can't spend 8mm a year anyway...
I understand that the purpose of the question was more about where would you find yield/generate value, but honestly, if I won the lottery and HAD to invest in real estate, I want steady cash flow. I don't want to invest in land or anything where I have carry and no annual return, or anything high risk/high reward
Land. Rates will be low for a while it seems and Federal reserve cash injections will drop yields worldwide
Are we talking timber, ag land, or just well located parcels?
See land banking. Can be ag/timberland with an income component but most land banking parcels are just raw, undeveloped land.
Sorry, I meant to reply to TheDebtStar
Data Centers and industrials as far as safe havens in RE go.
Commercial warehouses(large and small). E-commerce is getting bigger, and as individuals e-commerce businesses grow, they are gonna need space for their operations and as fulfillment centers. I would also invest in mobile home parks and I’ll just flip single family homes and sell them .
affordable housing. president biden/rice is coming.
In late March tried I raised some capital to try buying out one deal that went south for a guy who just got a loan from us. I knew he needed cash and this project would give him the lowest IRR out of 3 other projects he's financing with us. This was a mix-use property less than $10MM. I would probably try to keep doing that.
Bid-ask spread is bad in a lot of cities. But there are still some decent deals out there.
Delete delete delete delete delete
Pref equity on multifamily deals with a ROFO / ROFR. 8-10% current yield, protected should valuations fall and you're provided with future deal flow via the ROFO.
The private market for multifamily has really held up....huge delta between multi REIT NAVs and their share prices. Buy mutli REITs and hold for a year or 2. Demographics are still clear towards renting.
Otherwise, workforce multi and data centers 100%.
SFR is fine but its opex heavy.
Sorry new to the real estate industry, but can someone explain to me why life science buildings or data centers are attractive plays in this environment? And in which sub-markets would they be attractive?
I graduated from my masters program with a mid level manager at a data center builder. He told me they were building spreads of 600 basis points from ROC to cap rate (most developers are in the 100-200 bp spread from what I've heard). The centers also have lower turnover than products such as multifamily. Most of the tenants that lease, don't vacate any time soon. Typically they only vacate when they need more space to lease and the storage center is already fully occupied. As far as submarkets to invest, I would imagine that any city with a high tech workforce would be good (Boston, SF, Austin, Seattle, etc), but then again if it's a data center, I'm not sure location matters as much - just needs good access to an electric network to plug into.
6% ROC spread or 6% ROC? Depending on the cap rate you're looking at a ROC of 11% - 14% which seems pretty high. Must have been a really long time ago - I can't imagine this type of opportunity still exists today unless its a super speculative play or they are sourcing some crazy off-market land from people that don't know the value. Land prices would just get bid up to a market Yield by other developers if it's that lucrative. 100 - 200bps is the normal spread as you mentioned, and that can be hard to hit even without land cost given how expensive it can be to build.
Easy. Class C industrial space. HUD multifamily.
Vietnam
?
60/40 stock/bond index funds. Start with that and then come up with an alternative allocation in CRE that would be better than the 60/40 portfolio or otherwise complement it. When you go through this exercise you'll find it is hard to beat index funds.
I like the data REIT plays or looking to the stock market for anyone that's been overly battered. I want the liquidity assuming you can't find great opportunities in the real asset. You basically sit on the $100M as liquid and it gives you IMO risk free short term returns (36% YTD equinix, I'd take 15%, call it effectively 7.5% after cap gains I think?) and the dividends for 1-2 quarters, and data center reits look reasonable If I want to get into a real asset, my thought is to find something that doesn't lock your capital to potentially miss out on newer opportunities with the shutdown/slowdown uncertainty. I can't imagine many opportunities in real assets which don't lock your capital up through a longer period (end of covid) on projects with lower risk but still compensate you well enough. However, in that case I also liked the spec builds w/ construction loan, mezz or pref equity above which is short term money provided you lock in some sort of preferred rights for an opportunity on long-term/home run equity on the exit.
Lol all the large data center REITs are trading at 20x+ ebitda. you still want to play given how expensive that is??
Yeah in that first scenario, I do. I'm going to put my money in there, and then see what opportunities come about for a longer term real asset play. Buying $100M in equity and selling on the backend to then put into a hard asset may have execution risk but I'm ignoring that, maybe you're privy to it, maybe not. But that's my answer to the question. I'm choosing a stock with required dividends over the money market or treasuries for the short term while i'm waiting out for other opportunities in real assets. Or, as mentioned above an overly battered stock that I have conviction is 1) undervalued and 2) requires Armageddon for it to sink even lower. The point I'm making is, I don't want debt locked up long term, I want some capital protection through this slowdown/election year, but I want more than money market returns during a time where I think I'm not going to find anything attractive. I'm putting it exclusively in real estate the entire time.
delete-see response
Levering up on cheap debt and buying single-tenant NNN industrial with long-term leases in-place and credit tenants. Core industrial offers the least headaches in this environment from what I've seen. And much of it still trades at a halfway decent yield compared to what MF is trading at.
nice
You have to be careful with investments.
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