Beyond Stocks and Bonds

An Update from our Real Estate Partner

In today’s economic uncertainty, questions legitimately arise about various assets and investments. As fiduciaries we are constantly evaluating risk and reward in all of our exposures.  As of last Friday’s close, our Timbercreek Four Quadrant Real Estate Fund is down roughly -4% YTD.  This is due to publicly traded Real Estate Trusts held in that fund, which have pulled back along with the broader stock market.

I remember very clearly that during the 2008 real estate crisis, A type commercial properties retained near 100% occupancy and market values were generally unaffected. I suspect that, despite long term changes in how we work and shop, that this time will be similar.

Two pieces of commentary from Timbercreek Four Quadrants RE fund head Portfolio Manager, Corrado Russo:

  1. On Monday, we received commentary (see attached) on REITs with respect to today’s economic environment.
  2. Below is commentary written by Corrado to a client yesterday discussing a “V” vs. “U” shape recovery and his view on real estate investing during these uncertain times:

“With respect to your question around is this a V shaped recovery or a U-shaped recovery with a longer impact on earnings the answer is no one obviously really knows form sure.  I think if we look to China/HK where we have offices and speak to our people there every day, they took the hard step to quarantine and they are coming out of it now albeit slowly.  My own personal opinion is that we will see a severe shut down of the economy for 4-6 weeks.  Coming out the other side, some industries will find it tough to recover (hotels, healthcare), others will recovery very quickly (grocery stores, multifamily, life sciences offices, industrial from online sales, data centers).  My view is that what we should be doing is looking for companies and investments with “staying power” that exhibit low leverage, long term leases with high credit tenants, in industries that will have pent up demand allowing them to ramp up quicker.

As for when to invest I would answer it in two ways:  1.  I am 100% comfortable with the investments we have today and I believe current pricing is getting ridiculous and we will look back and say this was a tremendous buying opportunity.  2.  I am buying the fund personally this week.

What I am doing is buying 50% of my capacity now and then another 25% in 2 weeks and I will save my other 25% for 2 months from now or sooner if the opportunity gets greater.

Download PDF – Real Estate Update – March 20, 2020

 

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