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.
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.
The multifamily sector has stabilized in the near term, but its outlook will be affected by two disparate paths in front of the US economy: 1) a recession spurred by high interest rates and a decrease in consumer and government spending; or 2) a soft landing made possible by a strong consumer, on/near target inflation, and stable or slightly lower interest rates. In this multifamily outlook published in WealthManagement.com, Kingbird’s Chief Investment Officer Vincent DiSalvo shares more about how each scenario could unfold heading into 2024.
BOSTON, MASS. (May 24, 2023) – Kingbird Investment Management, the real estate subsidiary of Puerto Rico-based Grupo Ferré Rangel – a century-old, family-owned strategic investment holding company – has released a white paper highlighting the chronic undersupply of the US housing market for workforce rental housing.
