Latin American Billionaires Eye US Real Estate Market
Latin America’s wealthiest families are setting their sights on the US real estate market, with a particular interest in multifamily buildings. This trend comes as a real estate firm led by Israeli billionaire Eyal Ofer recently purchased a 57-unit apartment building near Manhattan’s Gramercy Park.
In late 2022, an investment firm backed by David Rubenstein, co-founder of Carlyle Group Inc, raised funds from wealthy investors worldwide to acquire apartment buildings and logistics properties.
Shifting Focus to Rental Housing
Prior to the pandemic, the world’s affluent individuals primarily invested in office properties, attracted by stable income from long-term leases. However, with the rise of remote work and increasing office vacancies, rental housing has become a more appealing option.
The commercial-property slowdown and rising borrowing costs have also impacted competition in the real estate space. Many institutional players have refrained from new deals, resulting in a 57% decline in global commercial-property investment volume in Q2 2023, according to CBRE Group Inc.
This situation has created an attractive opportunity for wealthy investors who are less vulnerable to debt market fluctuations and have a longer-term investment horizon. These investors often have the ability to pay with cash or secure financing through strong banking relationships.
Apartment Sector Poised for Growth
Although apartment transactions were down 66% in Q2 2023 compared to the previous year, CBRE predicts that the sector will benefit in the coming quarters. Despite concerns of an economic slowdown, renter demand remained strong in Q2, and fundamentals have stabilized.
While rents have slightly eased in the US, housing demand has led to significant rent increases in recent years. Median rent rose nearly 18% in 2021 and 3.5% in 2022, according to data from Apartment List. Many cities worldwide are also experiencing a supply crunch, driving up rental prices for tenants.
“COVID highlighted to everyone that the home is one of the few things you can’t deal without,” said Richard Valentine-Selsey, head of European living research at brokerage Savills. “You can do remote working and get your shopping online, but you need somewhere to live.”
Changing Strategies of Billionaires
Amancio Ortega, Spain’s richest man and founder of Zara, exemplifies the evolving real estate appetites of billionaires. While he previously focused on office buildings to diversify his fortune, his family office, Pontegadea, acquired New York’s 19 Dutch apartment building for approximately $500 million last year.
Ortega’s net worth of $75.6 billion includes over 10% invested in real estate. Real estate has long been a popular asset among the world’s wealthy due to stable cash flows and potential tax benefits. A survey by UBS Group AG revealed that family offices allocated about 13% to real estate in 2022, with over a third planning to increase their allocation in the next five years.
“They’re buying multifamily assets at good locations with attractive return rates,” said Ran Eliasaf, founder of investment firm Northwind Group. “The price they’re buying at is also appealing compared to a few years ago, and they’ll likely see rent increases over time due to the supply shortage.”
Challenges and Opportunities in the Apartment Sector
Investing in apartments comes with its own set of risks. Apartment leases are typically shorter than office leases, leading to higher turnover rates. Additionally, managing an apartment building requires addressing maintenance concerns and tenant inquiries. However, purchasing larger or multiple buildings can help mitigate these costs.
While the US remains the most attractive market for rental housing deals, other countries are catching up. Australia is encouraging investors to build rental properties to alleviate the housing crisis, and the multifamily sector, known as build-to-rent in certain countries, is gaining traction in the UK and Europe. This presents billionaires with more opportunities in the future.
An Opportune Time for Billionaires
The decline in US apartment prices makes it an opportune time for billionaires to seize investment opportunities. Ronald Dickerman, founder and president of Madison International Realty, suggests that long-term real estate investors should consider deploying capital now, as there is a cyclical buying opportunity.
Website Author’s Quote: “Investing in rental housing offers stability and potential returns, making it an excellent choice for long-term real estate investors.” – [Author Name]
Website Author’s Conclusion: The US real estate market is experiencing a shift as Latin American billionaires and other wealthy individuals turn their attention to rental housing. Factors such as remote work, rising office vacancies, and a commercial-property slowdown have made multifamily buildings more appealing. While challenges exist, such as shorter leases and maintenance concerns, the current decline in apartment prices presents a favorable buying opportunity. As the sector continues to grow globally, billionaires are expected to capitalize on this trend and expand their real estate portfolios.”
George Barham, an accomplished journalist and avid gambling enthusiast, serves as the esteemed Editor-in-Chief at fly-to-australia.com, Australia’s leading source for comprehensive gambling news and insights. With an unwavering passion for both the written word and the ever-evolving world of betting and gaming, George brings a wealth of knowledge and expertise to the helm of our editorial team.
