What’s hot in real estate right now are second-tier cities — Raleigh-Durham, Denver, Seattle, San Antonio – says Brendan Edmonds.
Edmonds, a partner at Atlantic-Pacific Capital, spoke on a panel about real estate investment at UNC Kenan-Flagler’s seventh annual Alternative Investments Conference on April 4. “Seeking Sustainable Yield” was the theme of the student-led event organized by the Private Equity Club, an MBA career organization.
“Find sandboxes that aren’t crowded,” said Edmonds. He anticipates that firms focused on secondary and niche markets will have success raising funds where spreads are better.
Thomas Lynch, partner at Iron Point Partners, seconds this focused strategy. His firm looks for real estate investment opportunities in cities with long-term growth opportunities, a diverse economy, good healthcare and strong higher-education institutions.
Iron Point has taken a particular interest recently in senior housing and data centers, Lynch said. “It’s overwhelming in some ways, the demand.”
Panelists agreed that secondary markets are likely to remain strong as interest rates rise.
“Our philosophy is: Markets where that cushion is bigger is where we’ll be okay when these interest rates start to rise,” said Tricia Noble, senior vice president at Amstar.
In addition to investments in non-core markets in the United States, Noble’s firm also has focused on global investment in locations such as Turkey, where Amstar has built five Western-style shopping malls.
“We’re seeing strategies that are very focused, track-record based, are the ones that are successful,” she said. “We’ve seen that the niche strategies that are very focused are successful.”
John Ockerbloom, managing director at Jefferies, advises clients on real estate investment opportunities. He sees opportunity for growth in the housing space.
“Finding value is a difficult thing,” he said. “Multi-family space has been beat up pretty good. There is opportunity there that hasn’t been there for a while — it’s inflation protected, rates reset frequently.”
Despite factors like rising interest rates and a limited new supply in the market, Edmonds feels positive about the direction of real estate investment.
“The headline in most places is that we’re back to the future,” he said. “Capital continues to flow in. I look at different signals from the institutional investor community. They’re bullish.”
Sponsors of the conference were Z Capital Partners, LLC, Purrington Moody Weil LLP, Royalty Exchange, SOLIC Capital Management, LLC, Plexus Capital, Laser Image Printing & Marketing, CFA Institute, Eurekahedge, HedgeCo.Net and the Private Equity Research Consortium (PERC).
The robust focus on private equity at UNC Kenan-Flagler extends from educational and career preparation for students – including the only student-run private equity fund at a top-tier business school – to the faculty’s research. Proceeds from the conference fund the Alternative Investment Fellowship, which assists selected UNC Kenan-Flagler MBA students gain summer internships with leading alternative investment firms.