Global Investors Eye North American Real Estate

Real Estate Opportunities: Next Alpha

Global investors are increasingly eyeing North American real estate as attractive investment opportunities given the asset class’s ability to generate alpha. Whether through direct investments, joint ventures or more, these allocators are expected to pour more money into both residential and commercial properties this year.

At CollabNet’s Inaugural Business Roundtable Series for 2020 titled “Real Estate Opportunities: The Next Alpha” moderated by CollabNet’s Co-Founder Harry Dublinsky and hosted by Todd Shaw, Senior Vice President at Morgan Stanley, which took place January 23, 2020, a series of real estate principals and investors shared their insights on where attractive risk-adjusted returns have been found for global allocators.

Here were a few geographic areas that have garnered the most traction:

NEW YORK CITY

Due to its diverse residential and commercial real estate, the Big Apple has seen an increase in interest from foreign investors, one of the latest groups being Koreans.

“New York City remains the miracle that can be done in a mere 17 square miles,” said Norman Sturner, Chairman, MHP Real Estate.

On the residential front, the City has seen interest from foreign investors, according to AnaTracey Hawkins, Vice President of Strategic Growth at CNY Group.  

“We have seen a lot of interest from foreign investors seeking both joint venture partnerships with construction companies and continued investment multi-family housing projects, so for us, everything is looking pretty optimistic.”

Finally, with real estate mogul Ed Mermelstein’s massive investment in developing real estate along one mile of waterway in the Bronx, foreign investors, according to investor Jacob Kassin, are also expected to pour money into that.  

TORONTO

Toronto has seen interest from Abu Dhabi, with investors buying multi-family housing, which has generated alpha for them given the massive influx of people moving to Canada’s largest city every single month seeking rentals.

“There are many multi-family buildings that have been passed down through generations, now owned by people charging $1000 a month for rent,” said Kassin. “After these investors purchase them, they have been able to turn the buildings and rent each unit at $2500 a month, which has generated tremendous alpha.”

SUN BELT

The Sun Belt region in the U.S. has also presented attractive opportunities in both residential and commercial real estate, specifically for Asian and Middle Eastern investors, especially considering the housing affordability crisis in the U.S.

 “We continue to find attractive opportunities in workforce housing, especially in the Sun Belt region,” said Bernie Wasserman, Managing Director, Virtus Real Estate Capital. “In recent years, we have focused on affordable workforce housing developments via public private partnerships with public entities at either the city or county level. The affordable housing crisis is real, creating long-term sustainable demand for quality affordable housing in key suburban growth markets. We remain optimistic about the ability to continue to generate alpha from cycle-resilient real estate. Given their strong fundamentals, the property types that we are keen on are affordable housing, health care and education assets.”

Ran Fuchs, Head of Capital Markets at IDB Capital (the wholly owned subsidiary of IDB Bank), also noted that multi-family housing outside New York City, especially in the Sun Belt, has had capital flocking to the asset class because the public has bought into the demographic shifts of a mobile generation and the desire of baby boomers to downsize in conjunction with lifestyle and taxation motivations.

“Multi-family seems to have turned into a very easy sale for many investors,” he said. “It’s that ‘flight to safety’ as many people escape the big cities, cold climates and higher tax states.”