WE Family Offices, a $12.5bn Miami-based multi-family office, plans to tap US residential real estate via private real estate investment trusts. The firm, which manages money for around 80 families, already has US farm and timber land allocations through private vehicles and believes that real estate will offer an additional kicker – liquidity.

The move comes as leading wealth investors are looking to boost allocations to multifamily funds while closely monitoring commercial real estate opportunities that could be presented by the Covid-19 pandemic.

“The pandemic exacerbated the advantaged versus disadvantaged sectors. If you look at apartments that cater to white collar professionals who can work from home, that would be a good area,” Sam Duame, senior investment manager, told REFI US. “Right now, we’re looking at private REITs because of liquidity.”

The firm seeks managers with stringent underwriting standards, direct knowledge of local market conditions, strong sourcing abilities and experience managing specific property types.

The US multifamily space has so far proven resilient through the pandemic, maintaining high occupancy rates and high average rent collection. However, some localized distress is starting to materialize, according to the National Multi-Family Housing Council’s Rent Payment Tracker, which found 86.8% of apartment households made full or partial rent payments by October 13. This compares with 89.2% the previous year.

BNP Paribas Wealth Management, which manages $444bn in assets, is also betting on residential real estate while keeping a close eye on commercial opportunities, in anticipation of a more attractive entry point in the near future.

“[The crisis] positively affected residential real estate. Whereas commercial real estate is [in a] quite difficult environment. However, we expect it to quickly bounce back, not in years but in quarters,” Florent Bronès, CIO of the $444bn firm, told REFI US.

UK residential transitions, commercial opportunities

The UK market may turn into a lucrative opportunity as commercial spaces are beginning to get converted into residential hubs, particularly in metropolitan cities, according to the CIO of a large London-based single-family office. “Now, if that’s going ahead those properties would make enormous returns. We are seeing this across the UK, specifically in Birmingham, Manchester and other hubs,” he added.

The family office CIO had a less sanguine view of the commercial sector, however.  Uncertainty of office tenancies coupled with the costs of adapting buildings to meet Covid-19 requirements makes this an unexciting entry point for investors.

“Commercial real estate got a decrease of investor interest but an increase in upfront costs. Simply put, there is volatility around the future of office spaces and huge costs associated with ensuring that the buildings are Covid-19-proofed,” the CIO added.

Echoing this sentiment, Salvatore Cordaro, co-CEO of $6.4bn private markets investor Investcorp-Tages plans to keep the firm’s allocations to commercial strategies at a plateau due to what he argued is an uneven risk/reward offering.

“We’re a little bit careful with [commercial real estate] as there are risks associated with this space. It’s not an area we’re over-allocating to,” he said.

Secondary cities rising

Still, Axion Financial sees commercial opportunities in secondary cities, according to founder and co-managing partner Antonios Kypreos. The Delaware-based multi-family office , which had $38m of client assets at the end of last year, typically invests in US-based student and multi-family housing via private REITs.

“Large city corporate areas may be in difficult times ahead as corporations move towards a mixed approach of working from home and in person work arrangements. Suburban corporate real estate is one area of positive growth stemming from the pandemic,” he said.

The company favors managers who are invested in their own fund, with a proven track record, niche sector expertise and ability to manage a portfolio during a crisis.

“Has the fund manager proven their strategy through a crisis like 2020?” he stressed. “[This year] has shown the advantage of funds’ prudent use of leverage and conservative loan to value ratios and why being conservative has its advantages.”