Where The Opportunities Lie

Private investors share their strategies for 2016 at the High Net Worth and Family Office Summit.



In the first of a five-part “Industry Insights” event series, The Real Estate Council and Real Estate Deal Sheet gathered top executives in the private investment realm to find out where they plan to focus their time and capital this year. Held March 2 at the Dallas Country Club, the morning event began with a keynote presentation from Albert Rabil III of Kayne Anderson Capital Advisors. It was followed by three rapid-fire panels moderated by Eric Beichler, managing principal of Mohr Partners. Here are excerpts from the presentations.

 

Albert Rabil III, Kayne Anderson Capital Advisors:

The way we approach investing is to do everything we can to get outside of real estate cycles and general economic cycles. What we’re trying to do is not be smart for seven years and dumb for three years, but really be smart whether we are in an up market or a down market. We initially started with student housing, and it has morphed into other niche real estate asset classes. Those asset classes share these dynamics: highly fragmented, recession-resistant, strong demographic trends, inefficient information and capital flows, and operationally intensive. My view is that the two primary predicators for return in any operationally intensive asset class are, No. 1, cost basis, and No. 2, your operational capabilities. We see opportunities in the student housing, senior housing, and medical office sectors. Our entire thesis is, in order to be successful over a long period of time in real estate, you really need to move away from boom-bust and away from beta- or macro-driven dynamics and get into alpha.

Brian Bischoff, Chief Partners LP: 

Finding value. That’s getting tougher to do, as a lot more capital has entered the market. It has really come down to fundamentals game, understanding supply and demand, understanding the rent roll, when terms are expiring, and who those tenants are. At the end of the day, we’re all core value investors; it’s all driven by value.

Rick Waggoner, MC Smith Realty: 

We made a shift in our strategy beginning the fourth quarter of 2014. Up until that time we had been 100 percent ground-up development, and we began to look for more opportunistic assets. It’s hard. With prices escalating—the cost of construction, the cost of land—it’s difficult to make the numbers work. And with the amount of cash chasing opportunistic assets, it’s hard to get in. Good opportunities are going to disappear quickly, so you have to react.

Jerry Wheeler, Mount Vernon Investments: 

Our opinion is, if you have a stabilized asset that can be attractive in marketplace right now, it’s good time to sell. That doesn’t mean there aren’t opportunities to put out additional capital, but it’s going to be value-add from our perspective. We have a fair amount of concern about the job growth in Texas. We are really seeing a deceleration across the board, although Dallas still had a pretty good year last year.

Vance Detwiler, Prescott Realty Group:

Over the last year or two, we’ve been more of a net seller than a net buyer. On the debt side, we’re focused primarily on buying underperforming opportunities. That has been nice little niche market for us; it’s heavily regulated and tough to get in, with high barriers to entry. ... I would probably look at the next 12-18 months as a time to be a little more cautious, although there still certainly are opportunities. 

Matt Mildren, Tug Hill Real Estate Partners:

We invest mainly in Texas and we’re contrarian advisers. We buy pretty much all product types except hotels. We like to be spread out—industrial, retail, medical office, and multifamily. The Dallas-Fort Worth market has been working out well.

Les Melcher, Woodbine Development Corp.:

For the last 10 years, we’ve focused on the hospitality market. We’ve historically done large resorts; over the last five or six years we’ve migrated to select service side. Our run hasn’t been near as good as multifamily, but we’re seeing good growth in hospitality, both developments and acquisitions. We focus on domestic markets, mostly, lately, in the Sun Belt and the West Coast. 

Clint Haggard, Burgher Haggard:

I’m speaking as one of nine owners, so you’re getting an owner-beneficiary perspective. My time is spent in Fort Worth with Burgher Haggard. We do a lot of work with families. About one-third of our investments are in real estate. We have more than $1.6 billion under construction with our clients right now, mostly in Texas. I’m seeing a lot of activity in multifamily, and some in self-storage.

Matt McMord, Corona Capital:

We’re trying to build up our real estate portfolio, and we’re looking to do that through partnerships. We like to find partners that are the best at what they do. We favor markets with high barriers to entry, where it’s harder to build, from a development perspective, where it might take several years to get entitlements in place, where the competition is going to be years behind us. That tends to be on the East and West coasts, the Mid-Atlantic. We like Texas, too.