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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.”