Midyear Outlook - Gemini Rosemont
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Midyear Outlook
www.nreionline.com
Midyear
Outlook
Insights from more than
50 frms on every aspect of
the commercial real estate
industry.
CONTENTS
16 Capital One 31 H. Hendy Associates
Industrial Investors Get Creative Office of Tomorrow: Healthcare
Advancements Drive Workplace
17 CCIM Institute
Maintaining a Steady Course 32 H. Hendy Associates
Experience Over Everything:
18 CIM Group
Renter Perceptions Will
Baby Boomers and Their Kids
Transform Property Design
(and Grandkids) Are Fueling
Metropolitan Population Growth 34 H. Hendy Associates
Automation, IoT and 3D Printing:
19 Cityview
These Three Trends Will
Opportunities Ahead for CRE
Dominate Your Facility in 2020
Investors
35 Hunt Real Estate Capital
20 Colliers International
Organizing Opportunity
The Economics of Self-Storage
Development 36 Instant Group
5 EDITOR’S LETTER 21 Corfac International
The Midwest is the Next U.S.
Market to See Sensational
Adaptive Reuse Opportunities at
OUTLOOKS an All-Time High
Growth in Flexible Space
6 Acres Capital 37 JCH Senior Housing
22 Cortland
Is the Lack of Debt on For-Sale The National Senior Housing
Multifamily Must Embrace the
Condos Showcasing a Growing Market: A 2019 Midyear Review
Experience Economy
Economic Crack?
38 JLL
23 CoStar Group
8 Alliant Approaching the Golden Age or
As the Cycle Progresses,
How the “Go Local” Crusade is Investors Focus on Core and
a Food Bubble?
Impacting Retail Real Estate Near-core Assets
Finance 24 Cushman & Wakefield
39 JLL
Northern N.J. Industrial
9 ArborCrowd Financing Market Highly Liquid
Retail Investors Prioritize Quality
Disaster Lurking: Poor Assets that Provide Secure
Underwriting is a Threat to the 25 Downtown Doral Opportunities
Real Estate Market Office Space Midyear Outlook:
40 Landmark Real Estate
The Case for Office Parks in
10 Arbor Realty Trust Campus Settings
The Perils of Crowds
The Small Multifamily Market to
41 Levin Management
Remain Strong in 2019 26 Elegran Capital &
Advisory The Union of Bricks-and-Mortar
11 Aspirant Group E-Commerce Warehousing and and Online Retail is One of
New Environmental Lender Logistics Evolution Industry’s Hottest Mergers
Portfolio Insurance and Risk
27 FreddieMac Multifamily 42 Marcus & Millichap
Transfer Options
Multifamily Market Growing A Tight Labor Market Portends
12 Avison Young Faster than Expected a Steady Outlook for the
South Florida Port Activity Apartment Sector
Continues to Fuel Industrial 28 Gate Labs
The Best Smart Locks for 44 Matter Real Estate
Expansion Group
Rental Properties Have Three
13 Buxton A Social Imperative for
Crucial Features
Cover Photo: Getty Images
Three Emerging Trends Developers
Influencing Today’s Retail Real 29 Gemini Rosemont
45 Middleburg
Estate Industry Institutional Equity Investing–Art
The High-Income Renter
or Science?
14 Bellwether Enterprise 46 NIC
How to Avoid an Affordable 30 H. Hendy Associates
An Emerging Opportunity for
Senior Housing Crisis: Provide Work Has Changed, Why
Investors and Operators: Middle
for the “Forgotten Middle” Haven’t Our Offices?
Income Seniors Housing
3 / NREI Midyear Outlook: 2018/ www.nreionline.com
Midyear Outlook: 2019
Institutional Equity Investing–Art or Science?
By Jon Dishell
A great leader once mentored me, “Equity is the mother’s
milk of all real estate investing.” While this may be obvi-
ous, the methodologies attendant to its utilization, like the
investment cycles it serves, come in a variety of forms which
have changed over the decades as real estate has become an
accepted asset class.
The nature of the sponsor and/or asset gives rise to
both the most prudent, and practical approach. With less
sophisticated sponsors in smaller investments, a syndi-
cation to friends and family remains the most common
execution. Conversely, in the institutional realm, options
are significantly more varied.
The availability of equity capital has increased over
time due to the now universally accepted premise that real
estate, like stocks, bonds and other asset classes, has finally which manager is best. An asset selection decision is typi-
earned a place in the institutional asset allocation model. cally employed only when an investor is comfortable with
The implementation of the class into the overall portfolio their ability to analyze the nuances of a specific investment.
has seen much deviation both by its magnitude (typical The ultimate determination as to how to best proceed
allocations are 5 percent to 10 percent) and the manner of can also fall to investment consultants. Ignoring the size,
adoption. For the latter, the most common approach is the type and perceived competency of firms, the main distinc-
commingled fund. tion is whether consultants have the discretion to make
The fund model allows investors to underwrite managers investment decisions or recommendations only. For the
and their strategies, but not the assets in which they invest as former, they become de facto investors and solicitation and
the sponsor is typically granted full discretion for investment servicing by investment managers is comparable to how
(and divestment) decisions. Most funds fall into two catego- the actual end-user investor is treated.
ries. Open-ended funds feature an infinite life, the ability to The last cycle resulted in a heightened focus on trans-
invest, or request the return of all or a part of their investment parency and served to increase the homogeneity of prod-
on a quarterly basis. The sponsor is compensated by asset uct types and offerings. This leveled the playing field and
management and other fees, but they do not typically partic- made choices simpler by reducing the breadth and compo-
ipate in profits. Closed-ended vehicles have defined invest- sition of the options. It is likely that this process will con-
ment, holding and divestment periods. Following the inves- tinue as the current cycle duration has resulted in a period
tor’s receipt of capital, plus an agreed upon preferred return, of greater circumspection. It will be interesting to see how
profits are shared with the sponsor. This provides sponsors this impacts the ways in which investors avail themselves
with earnings disproportionate to the original investment, of real estate investments moving forward. n
which is known as carried, or promotional interest.
On the other end of the spectrum lies the separate Jon Dishell is chief business development
account. In this investment structure, the investor retains officer of Gemini Rosemont Commercial Real
all decision-making rights and 100 percent ownership. Estate.
Although analogous to an asset management relationship Learn more at www.geminirosemont.com.
operationally, the manager is responsible for sourcing and
acquiring assets with the investor’s approval.
Photo: Getty Images
There are also hybrid approaches to each of these meth-
ods of investing. The underlying adoption may be predi-
cated by the investor’s confidence and ability to underwrite
managers and assets. In a commingled fund, whether open
or close ended, the investor is charged only with deciding
29 / NREI Midyear Outlook: 2019/ www.nreionline.comYou can also read
