How Top Real Estate Fund Managers Are Preparing for a Post-Covid World - Barron's | Canada News Media
Connect with us

Real eState

How Top Real Estate Fund Managers Are Preparing for a Post-Covid World – Barron's

Published

 on


E-working could kill offices the same way e-commerce killed malls.


Timothy A. Clary/AFP/Getty Images

Not many people want to buy an office building in Manhattan right now with everyone holed up in their apartments during a pandemic. Such is the dilemma for today’s real-estate investors. And nowhere is this more apparent than in real estate-focused mutual funds.

Such investors are preparing for a future with fewer in-person meetings. “We think three to five years from now 20% of the workforce is gone on a daily basis from the existing standing inventory of office space,” says Burl East, manager of

Altegris/AACA Opportunistic Real Estate

(ticker: RAANX), adding that some people may work from home permanently while others will come and go from the office with more flexibility. “We think this is a permanent problem, and we would call it analogous in many ways to the mall situation a decade ago.”

In other words, e-working will kill offices the same way e-commerce killed malls. East is so sure of his thesis that he has established short positions to bet against New York office real-estate investment trusts

Vornado Realty Trust

(VNO),

SL Green

(SLG), and

Empire State Realty Trust

(ESRT).

East’s boldness has paid off. His fund’s 19.7% five-year annualized return beats 98% of his peers in

Morningstar’s

real estate category. According to the fund’s latest quarterly commentary, over 80% of its assets were in Covid-19 resistant sectors. Instead of the typical office, retail and lodging plays, East has 24% of his portfolio in computer system data centers such as China-based

GDS

(GDS), the fund’s fourth-largest holding at 6.4%.

“Demand for mobile data is growing at 45% per year in the U.S.,” East says. “Those numbers are probably two times that in China.” The country’s cloud and data center infrastructure is behind the U.S., East adds. “They’re just now ramping up where our data center companies were five to eight years ago, and GDS is at the forefront of that.”

GDS has a 60% three-year annualized return. Meanwhile, another 20% of Altegris/AACA’s portfolio is in telecom cell tower companies such as

American Tower

(AMT), which has an 19.3% three-year annualized return.

For other top-performing real estate managers, such strong performance has become problematic. After a long economic recovery beginning in 2009, manager Rick Gable of

MFS Global Real Estate

(MGLAX) was expecting a slowdown coming into 2020, so he “was willing to pay a higher multiple for a business model I thought was just rock solid, and accept some valuation risk for that comfort level.”

But Gable’s thinking has since changed, as the popularity of data centers, cell towers, e-commerce warehouses, and lab space has made those real-estate sectors a crowded trade. Noting the “tailwinds in those sectors, and headwinds in sectors like office and retail, lodging, skilled nursing and so on, I have to believe there’s some disconnect between sentiment and reality,” he says.

Gable is “barbelling” his portfolio by holding growth stocks like data center owner

Equinix

(EQIX) and industrial warehouse company

Prologis

(PLD) alongside beaten-up senior housing company

Welltower

(WELL), down 18% in the past 12 months.

“We’ve found safety in some cheaper valuations in companies that have been deeply impacted by the pandemic,” he says. While the pandemic has caused nursing home quarantines, the housing need for America’s aging population “is as strong as it has been, and probably is going to get stronger.”

The pandemic has exacerbated retail real estate’s suffering as e-commerce continues to grow. Yet the dynamics for the sector differ by geographic region. “There’s a different impact [from coronavirus] to malls in Latin America. They aren’t burdened by the department stores like in the U.S. They’re more of a form of entertainment—safe, clean, and air conditioned. And there’s a lot more draw to the malls there,” Gable says. The fund has a position in Mexican retail, office and industrial real estate conglomerate

Fibra Uno Administracion

(FUNO11.Mexico), down 22.5% in the past year.

Asia has been recovering quicker than the U.S. and Europe from the pandemic. Asian retailers are better-positioned from a supply and demand perspective, says co-manager Greg Kuhl of

Janus Henderson Global Real Estate

(JERTX). “There’s much less retail storefronts available there. And the [pandemic] recovery seems to be happening there sooner.” Three of Janus Henderson’s largest positions with commercial property exposure in China are

China Resources Land

(1109.HongKong),

Sun Hung Kai Properties

(16.HongKong), and

Shimao Group

(813.HongKong). All three were down in 2020 due to the pandemic.

Hotels are due for a comeback when the pandemic ends, investors say. “There is going to be pent up demand for business travel that is client based and also for the entertainment experience in general,” says manager Rick Romano of

PGIM US Real Estate

(PJEAX) “Leisure travel will pick up. When you look back at the [Spanish flu] pandemic in 1918, that led to the roaring ‘20s. People are just so eager to go out that we could see a period like that again from a leisure perspective.”

Romano holds

Apple Hospitality REIT

(APLE). Since the REIT runs smaller hotels such as

Hampton Inns

that don’t have much convention business subject to Covid restrictions, it will be “first to recover.” 

Although it’s impossible to pinpoint the travel recovery’s timing, Romano and other managers see the latter half of 2021 and early 2022 as when some of the pent-up demand will be realized.

But for offices, the world may never be the same.

Email: editors@barrons.com

Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

Published

 on

 

TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Real eState

Homelessness: Tiny home village to open next week in Halifax suburb

Published

 on

 

HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Real eState

Here are some facts about British Columbia’s housing market

Published

 on

 

Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending

Exit mobile version