Realm CEO on Navigating the CRE Landscape with a Family Office Approach
Travis King, CEO of Realm, a firm working with ultra-high-net-worth families, shared insights into the current commercial real estate (CRE) market and Realm’s investment strategy in a recent interview. King emphasized the unique position family offices hold in navigating the complexities of the market, leveraging scale and a long-term investment horizon.
A unique Perspective Through Scale and Diversification
King highlighted the advantage Realm possesses due to its broad reach. “Continues to be a very true adage,” he stated, referring to the importance of diverse perspectives. “What we find is that we’re unique in that we move across property type and across geography.” Realm manages collectively north of $12 billion in investable assets for the families it serves, granting access to a notable volume of deal flow across various sectors.
He stressed the importance of understanding both macro and micro-cycles within real estate. “You don’t want to swim against the tide. You also don’t want to, you know, try to fight the cycle. But there’s micro-cycles that happen in different geographies and within different property types, so that’s a key thing to consider.”
Office as an Chance
When asked about his favorite CRE sector, King pointed to office properties. He believes pricing in many areas has begun to bottom out.”If you look at this point in time, what we think is engaging, you’ll start with office,” he explained. He described a shift in investment evaluation, moving beyond simply seeking lower prices to recognizing intrinsic value. “It really gets down to saying, ‘we know it’s cheap. It’s intrinsically cheap.’ In some cases, we’re buying things at 15% of replacement cost.” He cited a current investment opportunity in northern California as an example.
Avoiding Broad Categorizations & Focusing on the Lower Middle Market
King outlined a strategy of avoiding broad sector bets, recognizing cyclicality. “What I try to stay away from are broad categories,right? Say,for example,like,well R&D or industrial is going to be over. These things cycle, and there’s going to be different points in time.”
He acknowledged the current sentiment surrounding data centers, noting concerns about over-investment. Though, Realm’s focus on the “lower middle market” – deals of $50 million and below – keeps them somewhat distanced from this sector. “We especially were, we’re not really in data centers in a large way, as we focus on that lower middle market,” King said. “If you look at the big boys that have got tens of billions of dollars in their fund to be able to invest, there’s a lot of dollars required to do the infrastructure in the data center. We really focus on,kind of $50 million deals and below,as we feel like we’ve got an edge there.” He conceded that many investors are pursuing data centers, but it’s outside Realm’s current investment scope, and he agrees with the assessment that the sector may be late in its cycle.
impact of Potential Interest Rate Cuts
King anticipates that decreasing interest rates would broadly benefit the real estate market. “I would say reducing interest rates helps real estate in most every regard,” he stated. ”I think first and foremost, it’s going to help transaction volume. I think it just provides a wind to the sails of transactions, and it raises the value of all real estate.”
