The run-up to the housing crash during the past decade provided many institutional investors with less than stellar results. In some cases the losses were significant.
However, recent results achieved by experienced operators have been successful and measured. As the new home market gets capitalized further, there will be more good opportunities to create value. This coming year there will be billions of dollars of debt and equity pouring into creating successful, well-planned communities.
During the past four years that I have been moderating the capital markets discussion at NAHB, there has never been more institutional interest than now. This year, at the NAHB’s National Convention, the Association allowed me to create a 4.5-hour session hearing from and interacting with about 20 institutional investors, banks, pension fund advisers and their intermediaries. Many of the dozen or so institutionally funded speakers are direct investors in land and housing nationwide producing thousands of residential lots and housing units this year with reliable and durable IRRs.
One key difference this cycle is the prevalence of disciplined investing by experienced managers of institutional funds. From buying raw land to creating value by entitlements and building rooftops, solid returns are being consistently grown with many examples of success by equity and by debt with operators who understand how to manage risk.
The audience heard from five equity funds, four banks, some private bankers and a builder with an MBA from Wharton who builds 800 houses per year. The Meet the Money Session turned out to be a live two-hour crowdfunding event buzzing with activity from the 250-plus members present. It seemed to reflect the opportunity for more disciplined institutional capital as housing starts strengthen the economy. To learn more about our agenda, see it here.
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Rick Mandell is with Aspen Portfolio Strategies Inc.
