Displaying items by tag: commercial real estate

Technology-driven real estate investment manager Cadre recently announced the launch of an individual retirement account (IRA) solution, allowing investors to allocate their IRA funds into commercial real estate (CRE) through the Cadre platform. The firm expects the new investment option to continue to expand access to CRE, which is a tax-advantaged asset class with longer investment periods and attractive risk-adjusted returns relative to equities. The new product provides a solution for IRA investors who just experienced a challenging year in the market. CRE typically features more stability and longer holding periods than traditional IRA investments like equities. For instance, during recent market drawdowns like the Great Financial Crisis and Dot-Com recession, equities lost an average of 36% in value, while private real estate averaged a 31.86% gain over the same periods. According to the firm, this makes it a fit for investors hoping to harvest returns for retirement. Ryan Williams, Founder and Executive Chairman of Cadre stated, “I founded Cadre to provide more individuals with a tax-efficient tool that institutions and ultra-high-net-worth investors have traditionally used to build wealth.” By equipping investors with the ability to invest their IRA dollars, we aim to expand access to diversified, robust retirement portfolios – and by extension, generational wealth.”

Finsum:With investors experiencing deep drawdowns in their equity funds during market downturns, real estate investment manager Cadre has launched an IRA option for investors to access commercial real estate, which typically features more stability.

(New York)

Hotels are increasingly in trouble. About a quarter of all hotels in the US are now behind on their loan payments. COVID has obviously had a huge effect on hotel occupancy rates, which is now causing financial difficulties for the hotels and their lenders. The situation echoes other data from across the commercial real estate sector. For instance, Vornado Realty Trust yesterday said that it had only collected 53% of retail rents in April, and 90% of office rents.

FINSUM: We think it is critical to remember that re-opening is not a sign that all is clear in commercial real estate. Even once they re-open, restaurants and retail stores are still very likely to be doing MUCH less business than before they closed, and since a lot of cash reserves have probably been used up, their financial situation and thus the sector are just going to grow more precarious.

(New York)

Climate change is becoming more a reality than some distant fear. However, one of the challenges is forecasting how it will play out and impact different asset classes, many of which come as a surprise (e.g. cruise ships being significantly impacted). One of the aspects that everyone expects is that climate change is going to have a negative impact on commercial real estate, especially because so much debt exists in CRE on the coasts. However, the situation is not as grave as many think. If you analyze the performance of the mortgage market following the 2017 Hurricane Harvey disaster in Houston, one finds that the mortgage market was barely hurt. The reason has multiple causes, but one of the key points is that almost all lenders now require borrowers to have full flood insurance, mitigating risks.

FINSUM: Climate change is going to raise costs in the form of insurance premiums, but it doesn’t seem likely to do catastrophic damage. Even residential real estate, while hurt by Harvey, was not nearly as badly wounded as many expected.

(New York)

There are many in the market who think that real estate, and perhaps particularly commercial real estate, is in for a real headache. The real estate market tends to slump in recessions and there are special fears that the commercial real estate markets looks inflated. However, Barron’s argues the opposite, saying the three fundamental pillars of the CRE market are solid—overbuilding, overheating, over-indebtedness. The article uses a number of points to show that the market is not as overbuilt as many say it is, that price rises have been modest, and that borrowers and lenders have been restrained.

FINSUM: We don’t think it is as simple as just saying CRE looks fine. There are a lot of different areas of CRE. For instance, we are a lot less worried about new warehouses/logistics centers than simple office space.

(New York)

Boom looks ready to turn to bust in the real estate market. While those paying attention will already know that commercial real estate looks past its peak, and residential real estate has just started to show signs of weakness, what US investors may not realize is that the phenomenon is global, and that fact is more important than ever. Because of the rise of the global wealthy and their transient lifestyles, global real estate markets have become more correlated, and that means additional bad news for US home prices. All across the world, from London, to Sydney, to Beijing, to New York, urban home prices are weakening as inventories rise and the sector switches from a seller’s to a buyer’s market.

FINSUM: The real estate market used to be less correlated, but the huge boom in urban real estate over the last decade means that all areas will probably come down together too. To recap, US home purchases have been falling at the same time as inventories have finally begun rising. It seems like a rough period is coming.