Build Magazine May 2016

Build Magazine 47 Real Estate Generating wealth preservation, along with superior risk adjusted returns, is American’s strategy. American invests in Core, Core Plus, and Value Add apartment properties. American’s Senior Partners are experienced fiduciaries having owned and managed over $4.5 billion in apartment properties over the past 40 years. Ann McSheehy, Senior Principal at American, says, “It’s about how well you did in keeping risk low and generating outsized returns, how well you did in improving people’s lives and neighbourhoods, how successful you were in bringing solid alpha to co-investors, and, across all parts of the economic cycle. This is where we are differentiated, is in the quality of work that we do – we are stable and focused on wealth preservation, while we generate higher alpha for co-investors through our market expertise in deal sourcing and targeted renovations; we keep the investment stable across all economic cycles; and we make a huge positive impact on the lives of residents and neighborhoods – which allows us to bring great returns, even with an investment which has the risk profile of a bond.” “For several generations, my family has owned and managed apartment properties, with a strong focus on strategic value add,” says Ms. McSheehy. “Through the generations, we have cleaned up and turned around neighbourhoods which were once threatening to fall to crime, but which are now leading communities in the U.S.” Apartment Properties – the Gold Standard Apartment properties are the gold standard of the investment world, performing well in every economic environment. McSheehy explains, “Once in a while over the years, people will ask me, are we in a bubble, and I explain to them that Apartment Properties (Multifamily) is the gold standard of an investment that performs well in every economic environment. Even in the worst or recessions or depressions, when traditional stocks and bonds perform poorly, and even private equity performs poorly, and even when just about all of the other asset classes in real estate perform badly, Apartment Properties do well.” Over the past 30 years, investment in real estate has yielded a greater return than the S&P 500, the Dow Jones, the NASDAQ, or the Russell indices. Returns on private real estate investments in each of these periods, were higher than for publicly traded real estate, and had lower volatility, as measured by the National Council of Real Estate Investment Fiduciaries’ NCREIF National Property Index. (FTSE NAREIT U.S. Real Estate Index Returns, National Association of Real Estate Investment Trusts, S&P 500, Russell, Dow Jones, Nasdaq, FTSE NAREIT equity REIT index.) Why is that? “In a recession or a depression, companies do badly, stocks generally do badly and people lose huge percentages of their wealth in stocks and other investments as happens in every cycle; companies lay people off. Then, companies rent less office space and retail space, so those asset classes in real estate do terribly. And, far fewer numbers of people are able to afford a single family home, so those do terribly, too – they are not buying – they are renting. All of those buyers are forced to become renters – and so especially in the worst times, renter demand is robust and grows, and apartment properties perform well.” American’s principals have owned and managed apartment properties with consistent results throughout all market cycles. Strong Tailwind Demographics The ‘prime renting age’ in the U.S. is approximately 18-35 years old. Over the coming 10 years , the number of people “ageing out of” prime renting age is far smaller than the number of people “ageing into” this age. The net increase in individuals in prime renting age is set to increase from about 71 million people to about 86 million people. Additionally, the U.S. Census projects that homeownership will decline 6-8% in the coming decade, leading to a 6.6-8.8 million new renter households. Over the past decade, the construction of apartment properties declined. New construction is aimed primarily at the urban centres of large primary market cities, and nationally is projected to meet only a small fraction of new demand for apartments. This supply constraint creates strong fundamentals for the asset class, over and above its already strong fundamentals. Real Estate Fund Manager of the Year - USA Investing exclusively in apartment properties in the U.S. with laser focus, American Private Equity Group has consistently outperformed with its risk- adjusted returns. American’s Senior Principals are nationally recognized as the ‘father of the apartment industry in the U.S.’ with innovations vastly increasing the quality of life for residents throughout the U.S. We had a chance to speak with the firm and hear more what makes their strategy and focus cutting-edge.