It’s no secret that inflation is a volatile variable when it comes to managing your portfolio. Whether it wreaks havoc on your assets due to a downturned economy, the threat of war, political unrest, a disturbance in resource availability, or as a chilling response to a surging global pandemic for example; inflation is inevitable.
Recently, the U.S. labor department released year-over-year data which put inflation at 6.2 percent, which is the highest its been recorded since November 1990. Month-over-Month, the previous inflation percent was 5.4. According to Alli Wolf, chief economist at Zonda, a housing data and consulting firm, “If you have cash and are expecting inflation, you want to think through where you can put your money so it does not lose value. Housing is commonly looked at as a good inflation hedge, especially with interest rates so low.”
There are a number of investment asset classes out there that have historically performed better during times when inflation is uncertain. A few examples include investing in:
- Leveraged loans
- S&P 500
- Private equity real estate (PERE)
When it comes to PERE funds, particularly in multi-family commercial (MFC) real estate, industry research confirms the theory that these assets can provide investors protection against most, but not all inflation scenarios.
A material benefit of investing in an MFC asset class is its cash flow potential. When inflation rises, property owners can raise the rent to offset its effects. The more capital earned typically correlates to higher property values. Although this case isn’t true for all sectors. It’s important to do your due diligence with an experienced fund sponsor that knows how and when to adjust to ever-changing market conditions in the assets they target.
According to Richard Barkham, PhD, global chief economist, head of global research and head of Americas Research at CBRE, “Commercial real estate doesn’t give you instantaneous protection against all unexpected blips in inflation.” He continues, “However, if you look at a longer period of five, seven or 10 years, generally speaking, the values of real estate will go up with inflation.” He added that real estate tends to keep pace when inflation rises, particularly in rent prices increasing.
Multi-family rentals are surging and the baby boomer generation is a part of the reason why. Check out our article to learn more.
In addition, Berkadia, a trusted source in commercial real estate data, topics and actionable insights, wrote a case study that compared the performance of private commercial real estate, equity REITs and the stock market. One of the key findings of the research for the post-Great Financial Crisis (GFC) period studied is that when comparing individual property types, privately held apartments and industrial delivered the strongest risk-adjusted performance.
Now that you’ve learned more about multi-family commercial real estate assets and how it helps to hedge rising inflation, you may want to consider a fund sponsor with roots in Arizona’s third-largest city, Mesa.
Did you know?*
“In addition to all the momentum occurring in Mesa, we are excited about the opportunity from an economic sense as the Phoenix Metro area currently leads the nation in rent growth 17% from June 2020-June 2021. Additionally, comparable rents within the Mesa area have risen to over $2 per square foot and its population is expected to grow 6% by 2026, making the prospect of multi-family development extremely attractive,” John Hartman, Chief Investment Officer at Caliber states.
The Phoenix Metro ranked first in net migration for the third straight year as the population grew by over 100,000 people in 2020, outpacing the market’s 10-year average. Mesa currently has an annual growth rate of 2% and has seen its population increase by 22.5% since the 2010 census.
Future job growth in Mesa over the next 10 years is projected to be 47%, far outpacing the national average.
Click here to read our Commons of Mesa multi-family real estate asset announcement.
*Statistics used in the “Did you know?” section was pulled from CoStar, the largest commercial real estate information and analytics provider.
Have you heard about our Commons of Mesa multi-family commercial asset that’s available to invest in? Email us at [email protected] to learn more about this investment opportunity today.
As the Wealth Development Company, we are a leading U.S. sponsor with approximately $500 million in assets under development and management. These investments are comprised of alternative investments, which include private funds and syndications, externally managed real estate investment trusts (REITs) as well as public funds. We conduct substantially all business through our Sponsor, CaliberCos Inc., a vertically integrated platform that is strengthened by more than 70 professionals with decades of institutional experience in commercial real estate, capital markets, alternative investments, and mergers and acquisitions.
We allocate our alternative investment strategies and align them with investors’ investment objectives, risk profiles and liquidity preferences to offer an optimal balance of risk-adjusted returns and attractive investment performance. It is because of this thoughtful, intentional approach, and our unwavering pursuit of performance, that we have been deemed The Wealth Development Company.
We strive to build wealth for investors by offering a diverse host of investment solutions that fit our investors’ needs. With a primary focus on key middle-market growth areas, such as Arizona, Colorado, Nevada, Texas, Utah and Alaska, we evaluate other U.S. markets that possess the same attractive demographics and macroeconomic trends as our targeted markets, such as highly skilled labor, emerging population and job growth. In addition, we utilize our institutional full-service operating platform to generate operating efficiencies while enhancing the value of our investments through dedicated asset management strategies.
We create value through a combination of internal and external growth channels. Bringing together the benefits of real estate, deep asset-class, and capital markets expertise across public and private investments. We seed, develop, and manage a broad range of liquid and illiquid alternative strategies for a diverse group of investors who comprise approximately a $4 trillion alternative investment market, which includes high net worth, accredited and qualified investors, as well as family offices and smaller institutions. This strategy allows us to opportunistically compete in an evolving middle-market arena for alternative investments that range between $5 million and $50 million.
Click here to see Caliber’s current property portfolio.
If you would like to speak to someone about diversifying your retirement accounts, contact us at [email protected] or call (480) 295-7600 to schedule a call with a member of our Wealth Development Team.
If you would like to learn more about Opportunity Zone Investing, Caliber has put together a special guide that cuts through the myths and misconceptions and outlines the benefits, the risks, and the upcoming deadlines you must know to be able to participate. Get access to the guide here.
The information contained herein is general in nature and is not intended, and should not be construed, as accounting, financial, investment, legal, or tax advice, or opinion, in each instance provided by Caliber or any of its affiliates, agents, or representatives. The reader is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances, desires, needs, and requires consideration of all applicable facts and circumstances. The reader understands and acknowledges that, prior to taking any action relating to this material, the reader (i) has been encouraged to rely upon the advice of the reader’s accounting, financial, investment, legal, and tax advisers with respect to the accounting, financial, investment, legal, tax, and other considerations relating to this material, (ii) is not relying upon Caliber or any of its affiliates, agents, employees, managers, members, or representatives for accounting, financial, investment, legal, tax, or business advice, and (iii) has sought independent accounting, financial, investment, legal, tax, and business advice relating to this material. Caliber, and each of its affiliates, agents, employees, managers, members, and representatives assumes no obligation to inform the reader of any change in the law or other factors that could affect the information contained herein.