How multifamily offices are playing commercial real estate

High-net-worth investors are increasingly turning to alternative investments, with real estate being a top choice. To capitalize on these opportunities, some family offices are joining forces in multifamily offices, allowing them to pool resources, share expertise, and access larger deals. One such platform, Realm, boasts over $12 billion in assets under management and specializes in commercial real estate, catering to families with around $200 million in investable assets.

Benefits of Multifamily Offices

According to Travis King, CEO of Realm, the multifamily office model enables collective investment decisions, leveraging the combined capital, trusted relationships, industry knowledge, and geographic expertise of its members. This collaborative approach allows for better investment outcomes, as opposed to going it alone. King notes that institutions have significantly increased their real estate allocations in recent years, and family offices are now following suit, seeking to diversify their portfolios and tap into the benefits of real estate investing.

Real Estate Investment Strategies

King emphasizes the evolving nature of real estate, where no single focus is sufficient. Instead, his team takes a nuanced approach, moving across different property types and geographies. With a substantial scale of over $12 billion in investable assets, Realm can access a wide range of deal flows, allowing them to identify opportunities in various micro-cycles within the larger macro-cycle. This adaptability is crucial in navigating the complexities of real estate investing.

Current Market Trends

Currently, Realm finds the office sector intriguing, particularly in areas where pricing has bottomed out. King cites an example in Northern California, where investment decisions are no longer about waiting for prices to drop but rather about recognizing intrinsic value. In some cases, they are acquiring properties at 15% of replacement cost, indicating a favorable market for buyers. On the other hand, King is cautious about broad categories like R&D or industrial, as these sectors are subject to cyclical fluctuations.

Avoiding Overcrowded Markets

Realm is not heavily invested in data centers, a sector that has seen significant investment in recent years. While large players are active in this space, King’s strategy focuses on the lower middle market, targeting deals below $50 million. This approach allows Realm to maintain an edge in a less crowded field. King agrees that the data center sector might be late in its cycle, making it less appealing for investment.

Impact of Interest Rates on Real Estate

King believes that reducing interest rates would have a positive impact on the real estate market, boosting transaction volumes and increasing property values. Lower interest rates would provide a favorable environment for real estate investments, making it an attractive time for buyers and investors to engage in the market.