Jerome H. Powell’s recent announcement that the Federal Reserve is set to cut rates on September 18 signals a pivotal moment in the central bank’s ongoing efforts to tame inflation. While this move brings a general sense of relief and optimism across the commercial real estate industry, the implications for construction real estate investment portfolios are more complex.
In the last two years, registered investment advisors (RIAs) have been plagued by uncertainty and volatility while trying to protect principal and achieve returns for clients. To thrive amid these conditions, private real estate investments offer an opportunity for RIAs to generate compelling uncorrelated risk-adjusted returns. Following in the footsteps of family offices, which have long allocated funds to private real estate as a capital preservation strategy, RIAs will find this strategy can offer diversification, downside protection and a natural inflation hedge.
BOSTON, August 5, 2024 – In its latest insights, “1H 2024 Management Commentary: Stress, without distress,” Kingbird Investment Management (“Kingbird”), the real estate subsidiary of Puerto Rico-based family-owned strategic investment company Grupo Ferré Rangel, highlights the reasons that multifamily properties have avoided going into widespread distress, despite the deterioration of capital market conditions.
In an interview with Multifamily Dive about distress in multifamily, Kingbird’s Chief Investment Officer, Vincent DiSalvo, explains why concerns are overblown. Even though apartment owners with maturing loans will face higher interest rates and a decline in property values, he points to several reasons to be optimistic.
Real estate debt is both a boon and a curse, with higher-for-longer interest rates offering the potential for respectable returns as well as significant issues for existing investments. Kingbird Investment Management’s managing director of capital markets Lei Farrand discussed the sizable investment opportunity given the millions of mortgages that will need to be refinanced in a much higher interest rate environment than originally anticipated.
Potential trouble brewing in a sector that has been viewed as relatively bulletproof multifamily is concerning. But while stress is very much real, industry participants are quick to point out that the overall foundation for multifamily remains strong. “The cracks that we’re seeing are not structural; they’re superficial,” says Vincent DiSalvo, chief investment officer at Kingbird Investment Management, a family office investment firm specializing in multifamily.
