Displaying items by tag: real assets

The drop in interest rates last month contributed to an over 3% rise in the FTSE Nareit All Equity REITs Index, continuing a strong upward trend since October 2023, pushing growth to nearly 40%. In the third quarter, the index saw a notable 16.8% return, outperforming broader stock indices. 

Gains were broad, led by data centers, specialty, and office REITs, though residential REITs slightly declined. The shift in rates is also expected to bridge the gap between public and private real estate markets, potentially revitalizing commercial real estate investment. 

Active REIT managers have adjusted sector allocations, with healthcare, data centers, and telecommunications seeing increased interest. With REITs benefiting from strong balance sheets and attractive debt rates, the outlook for continued growth and activity remains positive for the coming quarters.

Finsum: We think gains are more likely to be robust in residential REITs because they are less dependent on work policies and labor market conditions.

While nontraded real estate investment trusts (REITs) have faced another challenging year, financial advisors are seeing a rise in sales of alternative investments overall. By August, financial advisors sold $76.6 billion of illiquid alternatives, including nontraded REITs, business development companies (BDCs), interval funds, and private placements. 

This amount matches 2023's total, with projections indicating the industry will surpass $115 billion by the end of 2024. Sales of nontraded REITs have notably decreased to $4.2 billion in the first eight months, compared to their peak of over $33 billion in 2022. 

However, BDCs have overtaken REITs as the most popular alternative investment sold, with $23.7 billion in sales through August. Blackstone Inc. leads in nontraded REIT and BDC sales this year.

Finsum: There is still an elevated risk premium built into most non-treasury rates right currently but REITs could see a bounce back with that falling soon. 

The interval fund market has seen notable growth in the first half of 2024, with net assets reaching $86.4 billion, a jump of nearly 11% since the first quarter, according to Robert A. Stanger & Co. Similarly, Morningstar reports that 100 interval funds manage approximately $80.7 billion, highlighting a rising trend fueled by RIAs. 

XA Investments adds that there are currently 110 interval funds managing $101.6 billion, with expectations to see up to 255 funds and $175 billion in net assets by the end of the year. The sector has rebounded from last year’s challenges in real estate-focused funds, now propelled by increased interest in credit and private equity strategies. 

Cliffwater LLC has emerged as a leader, managing nearly a quarter of the market's assets, with its private credit interval funds raising $4.9 billion so far this year. Meanwhile, infrastructure-focused interval funds are also seeing increased investor attention, contributing to a broader market expansion.

Finsum: It’s clear this is a new trend for RIAs and that they are seeing something in interval funds that their clients need.

Homes in some pandemic boom towns are significantly overvalued, with Reventure CEO Nick Gerli predicting a steep decline in the Southern real estate market. Gerli estimates that home prices in the South could drop by 20% over the next few years due to a surge in new housing inventory and waning demand. 

Florida and Texas, in particular, are seeing significant price declines, with seven of the 10 cities experiencing the largest number of price drops. The region's housing market bears similarities to previous bubbles, with home prices having surged 50%-70% since the pandemic, while incomes have only risen 10%-20%. 

This imbalance could lead to a substantial correction, especially if the economy enters a recession or unemployment rates rise. Despite the current affordability crisis, Gerli believes that patient homebuyers could find good opportunities in the coming years as the market adjusts.

Finsum: It’s important to monitor these changes in housing, but keep in mind SFR poses a completely different problem set and these areas could still flourish.

Real estate took one of the hardest hits in any submarket due to rising interest rates but as certainty starts to look a little clearer REITs pose to make a comeback.  Several real estate investment trusts (REITs) recently received analyst upgrades, indicating substantial potential upside.

Equity Residential, which owns numerous apartment communities, was upgraded by Piper Sandler from Neutral to Overweight with a new price target of $80. Acadia Realty Trust was upgraded by JP Morgan from Underweight to Neutral, with a price target of $18. Finally, Americold Realty Trust Inc., specializing in temperature-controlled storage, saw upgrades from both Barclays and Scotiabank, with price targets set at $26 and $30, respectively. Digital Realty Trust (NYSE

 Despite various market conditions, these REITs show promising growth prospects according to recent analyst evaluations. 

Finsum: Investors can also look to yield as an important factor and get income exposure through REITs.