Hidden Gems in Real Estate Investing

THE FINANCIAL COMMUTE

This week’s episode of THE FINANCIAL COMMUTE features a special session recorded live from Morton Wealth’s 2024 Investor Symposium. Chief Investment Officer Meghan Pinchuk welcomes our real estate fund managers, Megan Pautler-Gutnikov of KCB, Todd Williams of Grubb Properties and Shawn Clark of CRG. They discuss the current real estate environment, opportunities, and how they structure their deals to protect investors.

Here are some key takeaways from their conversation:

• CRG focuses on modern industrial facilities. Trends in the commercial proprety sector include larger buildings with advanced features like extensive parking and taller heights. Interest rate hikes have slowed new development, but reduced supply increases the value of existing properties.
• Grubb specializes in multi-family housing, which struggles with a persistent and serious shortage. Inflation and rising interest rates have driven up construction costs and reduced financing options. However, the long-term fundamentals remain strong.
• KCB takes a long-term cash flow-oriented strategy, holding properties of various types and industries indefinitely to weather market cycles.
• High-end, "class A" office buildings that are the highest quality in design, updates, and location are performing well and tend to remain strong even during economic downturns. However, many older office buildings that are not as desirable face demolition. Many class B buildings that are in the middle in terms of quality are being turned into hotels or affordable housing.
• Senior and student housing remain attractive. Data centers are also an area of opportunity because of the rise of AI.
• Industrial rent growth and inflation-linked lease bumps have helped offset valuation declines caused by rising cap rates.
• The panelists emphasize the cyclical nature of real estate and suggest that while challenges persist, the market is at a trough, presenting strategic opportunities for those prepared to invest during uncertain times.