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6 Insanely Inspiring Real Estate Investing Success Stories

Investing in real estate is often compared to a box of chocolates. There are so many choices, it’s hard to know what to take a bite of first. But unlike eating candy, choosing the wrong rental property can be a lot harder to swallow.

In this article we’ll profile six real estate investors, each with a different success story to tell. 

You will learn how two beginners got their start, why one Bay Area investor stopped renting and began buying in Indianapolis and why buy-and-hold is the crème de la crème real estate investment strategy. 

Plus, we’ll explain how two high-tech entrepreneurs doubled their returns by transitioning from commercial office to a 169-unit portfolio of single-family rental homes using a 1031 exchange.

Tips on Picking Your First Rental Property

Here’s how two newbie investors used the Roofstock Investment Property Marketplace to pick their first investment properties and launch their real estate investing careers:

Sarah Park, Senior Product Designer

Sarah is based out of the San Francisco Bay Area. Like many beginning real estate investors in California she decided to invest out-of-state because of the lofty home prices in many major markets here.

She studied and researched different areas for about six months before settling on a single-family rental house in Memphis. Sarah’s investment strategy is to focus on cash flow, solid market fundamentals, and current rent vs. property value by using the 1% rule. 

The house she purchased in Tennessee ticked all of these boxes and more. Her first rental property provided a first-year net cash flow of almost $3,000, a cap rate of 8.4%, and a gross yield of nearly 14%.

Sarah’s biggest surprise about owning rental property? 

All of the expenses and deductions she was able to claim thanks to the real estate-friendly tax rules in the U.S. Learn more about Sarah’s real estate investing success here .

Jason Pabon, Buyer Account Executive

Jason also pursued the buy-and-hold strategy. He began his real estate investing business by spending countless hours networking with other investors, reading books from real estate pros like Robert Kiyosaki and David Lindahl, and listening to podcasts from BiggerPockets.

When the time was right, Jason was ready to start looking for the perfect rental property. He had four top criteria for choosing where to invest:

• Market with strong job and population growth and new development
• 1% rule of current rent vs. property value
• Minimum 7% cap rate
• 3-star neighborhood or higher as ranked in the Roofstock Marketplace

He budgeted $20,000 to get started and found exactly what he was looking for in suburban Cleveland. His 2-bedroom/1-bath single-family rental offered a cap rate of over 8.5% and a total 5-year return of nearly $9,200.

Jason’s tips for first-time real estate investors include locking in the loan interest rate, setting reachable goals to keep yourself accountable, and using a Roofstock preferred property manager instead of the seller’s.

Why One Investor Loves Indianapolis

Like many people living in the Bay Area – where a tiny house on a postage stamp-size lot can easily run $1 million or more – Tyler Jahnke was one of the over 111 million people renting in the U.S.

One day, he calculated that by the time his lease was up, he and his roommates would have literally paid enough in rent for his landlord’s son to go to college. That’s when the lightbulb turned on and Tyler realized he had to jump into real estate investing.

On a salary of just $44,000 a year, Tyler knew that buying rental property in his own backyard simply wasn’t financially possible. But, becoming a long-distance landlord was not only feasible but offered huge opportunities for affordable cash-flowing properties.

After studying various rental markets across the country Tyler decided to begin building his rental property portfolio in Indianapolis. There are 10 reasons why this beginning real estate investor likes Indianapolis so much:

• Population growth
• Job growth in high-wage sectors
• Business friendly
• Diverse economy
• Strong occupancy rates
• Acquisition price-to-rent ratio
• Landlord friendly laws
• Infrastructure development
• Lifestyle amenities attract both tenants and business

Tyler also realizes that investing in single-family rental real estate is the way for him to accomplish the goals he envisions:

“There was no way I’d have a completely fulfilled life if I kept throwing money at my savings account and watching it build slower than the inflation rate.”

Buying Buy-and-Hold Real Estate for 9+ Years

There are three typical investing strategies to choose from when deciding how to invest in real estate: Fix-and flip, Short-term buy-and-hold, and Long-term buy-and-hold.

Of these three strategic real estate investing options, long-term buy-and-hold is generally considered the crème de la crème for a variety of reasons, including consistent cash flow and the compound effect of appreciation. 

The main benefits of buy-and-hold real estate investing are:

• Goal planning is easier to achieve
• Compound effect of appreciation
• Tax benefits such as 1031 exchanges
• Easier to manage and scale up a rental property portfolio over time
• Stable net worth due to steady cash flow and long-term appreciation

On the other hand, successful fixing-and-flipping depends on perfectly timing the market on every flip, while holding real estate over the short-term often means expensive repairs and financing options that can lead to erratic cash flow.

Michael Albaum, Buy-and-Hold Real Estate Investor

After experimenting with a variety of investing strategies, Michael and his wife settled on long-distance real estate investing with single-family homes. 

Thanks to their buy-and-hold strategy, the couple was able to quit their full-time 9-5 jobs and travel the world while working remotely and managing their rental property business from a laptop. 

Another big advantage of investing long-term is that literally any type of property can make a great buy and hold investment, according to Michael :

“The first single-family rental (SFR) that I purchased is a long-term investment. The first duplex that I purchased is a long-term buy and hold. The first triplex that I purchased is a long-term buy and hold. The first 8-plex that I purchased is a long-term buy and hold. You get the idea…”

Before buying buy-and-hold rental property, Michael suggest investors consider these four important factors:

• Age of building
• Local market conditions
• Real estate team dynamics
• Availability of good deals in the market

One of the best things that Michael loves about Roofstock is the fact that they’ve vetted the investment property available on the Roofstock Marketplace and they’ve already done the legwork in assembling a real estate team. 

That’s critical, because it allows the rental property investment process to become ‘rinse, wash, and repeat’ when it comes to deal acquisition and property management.

How These Business Partners Converted 1 Commercial Property Into 169 Single-Family Homes

Many real estate investors have heard of a 1031 tax deferred like-kind exchange. It’s based on Section 1031 of the Internal Revenue Code and allows investors to sell one income-producing property and buy another, while deferring 100% of any capital gains tax due.

But what many people aren’t aware of is that ‘like-kind’ doesn’t have to be the exact same type of real estate. As long as a property is held for business or investment purposes, it can be exchanged tax-free for another property in a different asset class.

For example, land can be exchanged for a warehouse, a shopping center can be relinquished for an apartment building, or a large office building can be sold and replaced with dozens of small single-family rental homes.

Doubling ROI with single-family rental property

In fact, that’s exactly what Tom Fallows (founder of Google Express) and his business partner Jonathan Kibera did. The investors sold a commercial office building that they’d owned for 13 years in San Francisco’s North Beach neighborhood and exchanged it for a Roofstock Portfolio of 169 single-family rental properties.

The portfolio Tom and Jonathan acquired through their strategic 1031 exchange consisted of 57 homes in Milwaukee and 122 homes in Columbia, South Carolina. 

According to Tom, everyone told the real estate investment duo they were “crazy” to try and do a 1031 into hundreds of properties. Since they already owned commercial real estate, the expert advisors kept pitching “traditional” tried and true properties like Walgreens, Home Depot, and shopping malls.

But Tom and Jonathan are used to thinking outside of the box and defying the status quo. There are several reasons why they made the unconventional jump from commercial real estate to single-family rental properties:

• Nearly doubled their ROI by transitioning from commercial to residential
• Took their portfolio cap rate from 4% to 8%
• Diversified their holdings geographically with a completely different asset class

Here’s the bottom line, according to Tom:

“Transitioning from commercial real estate to residential real estate through a 1031 is not a common or popular thing because it is seen as complex. But despite what everyone says, it’s possible.” 

Characteristics of a Successful Real Estate Investor

The six real estate investors profiled in this article come from different age groups, professions, and walks of life. So, it makes sense to ask, what exactly is it that makes a successful real estate investor?

Here’s what Forbes recently had to say about “The Top Seven Traits Of A Successful Real Estate Investor”:

• Knowledge and an understanding of what drives real estate market cycles
• Patience to know when to move fast, when to hold, and when to wait and see how things develop
• Vision to invest in cash flowing buy-and-hold property while adding value
• Efficiency to focus on the tasks that add to the bottom line and delegate the rest
• Focus to know what you want and not allow any obstacles to stand in the way
• Relationship building by embracing that fact that “it’s not what you know, it’s who you know”
• Leverage of money, people, and opportunity

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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How to Analyze a Real Estate Investment

• 24 Aug 2021

Real estate is the world's largest asset class, and for good reason: It’s both capital-intensive and relatively accessible. According to Savills World Research , the value of global real estate reached an estimated $280.6 trillion at the end of 2017, making up more than 77 percent of the world’s wealth.

Real estate is often the primary source of wealth for individuals and the biggest investment many make in their lives. Consider the building you’re in right now. It may be owned by a company or person to whom you or a business pays rent. It could be your home that you own or pay a mortgage on, or a hotel you’re paying to stay at.

Because of its accessibility and history of high returns, real estate is an incredibly popular alternative investment option for individuals. But how can you get involved in real estate, and how do you know if a property is a wise investment decision?

To succeed as a real estate investor, you need to understand the four key factors to consider when analyzing a potential investment. Before diving into these factors, here’s a primer on the five types of real estate and how to invest.

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5 Types of Real Estate and How to Invest

If you’re interested in entering the world of real estate investment, there are five types of real estate to consider:

• Housing (multi- or single-family)

Each type of real estate has nuances, including lease length, building permits, and property laws. Make sure to research these nuances by geographic location when deciding which real estate investment type makes sense for you.

There are several ways you can get involved as an individual investor, including owning property outright and contributing capital to a real estate venture or real estate investment trust (REIT). Each has its advantages and disadvantages, namely when it comes to control over the investment property and opportunities for diversification.

Owning property provides you with the most control over your investment. For instance, imagine you decide to buy an apartment building in Boston and do so by leveraging debt. As the landlord, you can choose who to lease the apartments to, how much to charge for rent, and how much money to put into the property to increase its appeal and value. Owning one building doesn’t make for a diverse portfolio, however, leaving you vulnerable to anything that could damage the building or its appeal, such as a fire or pest infestation.

On the other hand, contributing to a real estate venture, fund, or REIT gives you less control over investment properties but more opportunities to diversify. For instance, say you contribute a small amount of money into an apartment building in Chicago, another sum into a new office building in New York City, and a bit more into a retail space in Denver. While the managing body controls the investments, you’re able to spread out your contributions to mitigate risk and potentially tap into returns from several unique properties.

There’s no single correct way to invest in real estate, but there are several factors to consider when selecting an investment opportunity.

Related: 7 Types of Alternative Investments Everyone Should Know

Factors to Consider in a Potential Real Estate Investment

To analyze a real estate investment opportunity, you need to consider four factors. These factors can be visualized using the real estate diamond framework, introduced by Harvard Business School Professor Arthur Segel in the online course Alternative Investments . It shows how four factors—product, people, external environment, and capital markets—are interconnected in the real estate investment space.

The visual shows a factor in each corner of the diamond with arrows indicating that it influences the others. As such, it’s critical to consider all four factors when analyzing a real estate investment. Here’s a breakdown of each factor and its many facets to consider.

1. The Product

In real estate, the product is the building and the land it sits on. When assessing an investment opportunity, one major advantage of real estate is being able to physically see, touch, and experience property for yourself. The goal with any investment is to increase the product’s value so you can earn a return. With that in mind, assess the product for anything that may decrease its value.

Consider items such as:

• Infrastructure: Is the building physically sound and up to code? Are there built-in design flaws—for instance, floor plan, fixtures, or wall thickness—that could make the space unappealing?
• Signs of damage: Think mold, plumbing issues, faulty heating and cooling systems—anything that could make the space unlivable.
• Physical location: Is the property close to highways, public transportation, offices, parking, green space, or stores and restaurants? Consider the appeal of renting the space from the renter’s perspective and of visiting the space from the perspective of their business’s potential patrons.
• Local supply and demand: What are vacancy and absorption rates like in the area at the time?
• Projected costs: Are there any improvement projects that need to be done? How will maintenance requests be handled? What are property tax rates like in the area?

The property itself provides much to consider when analyzing an investment opportunity, but it doesn’t exist in a vacuum.

2. The People

Something unique about real estate as compared to other types of investments is the flexibility of its deal structure and how much of an investment’s success relies on maintaining good relationships.

In Alternative Investments, Segel lists just a few of the people you need to have a positive relationship with when investing in a new building:

• Police chief
• Building architect
• Contractors
• Subcontractors
• Roof inspector
• Elevator inspector

“The list of relationships you need to manage goes on and on,” Segel says. “It’s these various ad-hoc relationships and working with many kinds of people—that’s what makes this business so much fun.”

Because of real estate’s flexible deal structure, Segel advises investors to brush up on their negotiation skills .

“Because real estate has non-standard pricing and flexible deal structuring, everything and any transaction is a negotiation,” he says.

When analyzing a potential investment, consider the relationships you have with the people involved. If there are existing strained relationships, perhaps this isn’t the right investment for you. With so much riding on how you interact with others, it can literally pay off to have a good rapport and negotiation skills.

Related: Why Real Estate Agents Need to Keep Their Negotiation Skills Sharp

3. The External Environment

While any investment is risky, the real estate field is especially susceptible to factors outside the investor’s control. Because your investment is in a physical building or set of buildings, the way your investment performs will be impacted by countless external environmental factors, such as:

• Weather and natural disasters
• Changes in local or national laws
• The coronavirus (COVID-19) pandemic
• Shifting demographics in the area
• Technological advancements

One example of a technological advancement Segel describes in Alternative Investments is the rise of 3D-printed homes. Most often used in areas that need more housing at a rapid pace, 3D-printed homes aren’t extremely expensive to create and could change the way the real estate industry looks at new builds.

“Every property type is affected by these new technologies,” Segel says. “It’s going to be fascinating to see how this industry adapts.”

While it’s impossible to account for the multitude of external factors when analyzing a potential investment, it’s useful to consider as many as possible and be prepared for the unexpected.

4. The Capital Markets

Once you’ve determined that a property is a good investment choice in terms of the people involved, external environment, and product itself, how will you fund your investment? This is where capital markets come in.

Capital markets are defined in Alternative Investments as the channels through which those who have capital to invest connect with those who can put that capital to profitable use. It’s worth noting that capital markets are governed by local laws, real estate market structure, and investment trends, so when deciding where to invest, consider the capital markets available to you and how they may differ from each other.

Because real estate is a capital-intensive industry—meaning you need a lot of cash upfront to invest—many choose to finance investments using debt, commonly referred to as “employing leverage.” Debt secured by a property is referred to as a mortgage , which makes up the largest asset class in the United States.

The other investment method at your disposal is equity, which grants you a share of a property’s profits in exchange for upfront investment in the purchase of it. Typically, an equity investor’s returns will be seen when a property is refinanced or sold outright.

Both debt and equity can be employed through private and public market channels when financing real estate investments. Private real estate transactions typically occur between the two principals involved, whereas public real estate transactions are often made between parties representing others. Private transactions are most common in real estate, but public transactions present an opportunity for higher liquidity.

When analyzing a real estate investment opportunity, consider which capital market makes the most sense for your financial situation and goals.

Making Wise Real Estate Investments

To effectively analyze a potential real estate investment, you need to consider each facet of the real estate diamond. By considering these four factors, you can gain an informed picture of the investment opportunity and decide if the property is worth it.

While the real estate diamond presents a clear visualization of key factors to consider, the real estate investment space is nuanced and requires dedicated study to master. If you’re interested in deepening your knowledge of real estate and other alternative investments, consider taking the online course Alternative Investments to gain the skills necessary to make wise investments and build diverse portfolios.

Are you interested in expanding your analysis skills for real estate and other alternative investments? Explore our five-week online course Alternative Investments and other finance and accounting courses .

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Real Estate Investment Banking: The Best Way to Make Yourself Indispensable?

If you're new here, please click here to get my FREE 57-page investment banking recruiting guide - plus, get weekly updates so that you can break into investment banking . Thanks for visiting!

Talk to anyone looking to move into investment banking, and they’ll have one big, overriding fear.

No, not the hours , the psychological and physical abuse, or the extreme difficulty of breaking in .

They’ll be worried about the exit opportunities – specifically, working in a group that doesn’t offer many.

This explains why many prospective bankers avoid overly specialized groups, with financial institutions and oil & gas at the top of the list.

But there may be one exception to this rule: real estate investment banking .

If you work in REIB, you’ll most likely stay in a real estate-related role afterward.

But the difference is that there are far more finance roles in and around real estate than in the other sectors.

You can go into commercial real estate and work with individual properties, join a real estate private equity firm , work in real estate lending , go to a commercial mortgage-backed securities (CMBS) group , and more.

But before putting the exit-opportunity cart before the breaking-in horse, let’s start with some key definitions:

Real Estate Operating Companies, Developers, and Service/Leasing Companies

Home builders, investment banking industry groups: real estate.

Real Estate Investment Banking Definition: In real estate investment banking (REIB), professionals advise entire companies in the REIT, gaming, lodging, homebuilding, development, and real estate services segments on raising debt and equity and completing mergers, acquisitions, and asset sales.

You have to be careful with this definition because many firms, such as CBRE and Jones Lang LaSalle (JLL), also have “real estate investment banking groups.”

In most cases, however, these groups help raise debt and equity for individual properties, not entire companies – so it is not actual “investment banking.”

(Note that this point has changed over time due to deals such as JLL acquiring HFF, a real estate IB firm, which strengthened JLL’s investment banking capabilities.)

Similarly, banks such as Goldman Sachs might have separate “Real Estate Financing” teams , but these groups raise capital for deals involving individual properties.

If the group advises entire companies on equity and debt issuances and M&A deals , it is REIB; otherwise, it’s more like a brokerage role.

The main verticals within REIB are usually:

• Real Estate Investment Trusts (REITs) – These entities constantly raise debt and equity to acquire and develop properties, and they’re subject to special rules that eliminate or greatly reduce their corporate taxes. There are also mortgage REITs that invest in loan portfolios rather than property equity, but they operate more like commercial banks and may be covered within FIG .
• Gaming – Casino companies, but “gaming” sounds more sophisticated. Restaurant and live-event operations may also be included.
• Lodging – Hotels, resorts, and cruise lines.
• Home Builders – These firms construct and sell homes, often focusing on specific geographies, price ranges, or home types.
• Real Estate Operating Companies (REOCs) and Developers – REOCs are similar to REITs but do not comply with the same rules and restrictions; in exchange, they also pay corporate taxes and may not need to issue debt and equity as frequently. Developers are similar to home builders but operate across all property types, often focusing on commercial rather than residential buildings.
• Real Estate Service/Leasing Companies – These are “miscellaneous” companies that offer other services in the sector. One infamous example is WeWork, which attempted to make a business out of leasing office space and re-leasing it at higher rates – until it imploded in a mix of cocaine, MDMA, and cult-like behavior .

Sometimes, RE bankers also advise on the property portfolios of non-RE companies, such as a consumer/retail company that wants to acquire space and build more stores.

Recruiting: Who Gets Into Real Estate Investment Banking?

The same types of candidates who are competitive for other investment banking roles at bulge brackets , elite boutiques , and middle market firms are also competitive for real estate IB roles.

So, it mostly comes down to the quality of your university or business school, your GPA, your previous work experience, and your networking efforts and technical preparation.

You have an advantage if you’ve had previous industry experience, and you probably have an even bigger advantage here because real estate is specialized.

But you’re probably wondering about this question: Can you use other RE roles, such as lending or brokerage, to break into REIB “through the side door”?

The best answer I can give is: “Maybe, but don’t hold your breath because it’s harder than you might expect.”

The problem is that the skill sets are quite different because in most other RE roles available to university graduates, you don’t work with corporate entities the same way bankers do.

So, it’s possible to use one of these RE-related roles to move into IB, but it’s more realistic to use them as an entry point into something like real estate private equity .

If you want to use this strategy to get into banking, you should look for a RE-related role at a large bank ; it will be easier to transfer once you’re already inside a big firm.

What Do You Do as an Analyst or Associate in Real Estate Investment Banking?

You can expect to work on the standard transactions: follow-on equity issuances, debt issuances, the occasional IPO , and M&A deals.

But there are a few differences:

• Asset Disposals / Spin-Offs – Asset-level deals are far more common among REITs and gaming/lodging operators because it’s much faster and easier to acquire a few properties than an entire company.
• Highly Variable M&A Deals – It’s not that common to work on REIT-to-REIT M&A deals because there aren’t that many publicly-traded REITs. Acquisitions of entire companies tend to be more common in the non-REIT verticals.
• More Deal Variety – Since real estate is specialized, you’ll be more likely to contribute more to deals like IPOs and debt restructurings that are handed off to other teams ( ECM or Restructuring ) when they come up in other industry groups.

At most large banks, the model is to cover a few of the largest companies in each vertical and be “on call” for their transaction needs.

But huge M&A deals are not that common among REITs and a few of the other company types, so you’ll spend a fair amount of time pitching and working on follow-on equity offerings, debt issuances, and asset deals.

Real Estate Trends and Drivers

The trends and drivers depend heavily on the sector, even within a specific area such as REITs.

For example, a nursing-home REIT is influenced by different forces than a multifamily (apartment) REIT or an industrial (warehouse) REIT, even though they’re all “real estate investment trusts.”

And once you go outside of that vertical, a high-end casino operator is even more different from, say, an affordable home builder.

Real estate is all about location , which means: “How many people/businesses are moving into an area vs. moving out of it?”

For example, companies like home builders and multifamily REITs are driven by demographics, average income levels, and rent vs. homeownership costs in specific areas.

If younger, higher-income people move into an area at a high rate, and new homes are relatively inexpensive next to renting, new home demand will be higher.

Sectors such as office REITs are driven by business activity in the region and whether companies are expanding, shrinking, or telling employees to work from home.

In the gaming and lodging verticals, consumer discretionary spending drives growth.

These areas are tightly linked to economic conditions and income levels, and they suffer disproportionately when there’s a downturn.

They’re also affected by factors like barriers to entry (licensing and regulations for gambling) and the areas surrounding their key properties.

Finally, technological shifts play an increasingly important role in real estate.

For example, consider the impact of more white-collar professionals working from home:

• Offices tend to suffer because fewer employees will be in the office, which reduces demand for space, drives down rental rates, and reduces the probability of existing tenants renewing their leases.
• Multifamily properties and home builders benefit because people want larger, separate spaces if they’re working from home.
• Industrial assets , i.e., warehouses, also benefit because people working from home tend to shop online, and all those orders are aggregated and distributed from warehouses.
• Gaming and lodging companies experience a mixed impact. Casinos near suburbs and exurbs might benefit because they’re closer to peoples’ homes, but fewer people will be inclined to take cruises and fly to distant locations.

Real Estate Sector Overview by Vertical

Banks divide their real estate groups in many different ways, but we’ll continue with the categories above:

Real Estate Investment Trusts (REITs)

Representative Large-Cap, Global, Public Companies: Weyerhaeuser Company (Timber), American Tower Corporation (Cell Towers), Equinix (Data Centers), Prologis (Industrials), Simon Property (Retail), Welltower (Senior Housing), Ventas (Healthcare), Public Storage, Boston Properties (Offices), Equity Residential (Multifamily), and AvalonBay (Multifamily).

There are thousands of REITs worldwide, but fewer than 100 are public companies with over $1 billion USD in revenue.

The largest REITs are based in the U.S., but countries like Australia, the U.K., France, and Canada also have a good number.

REITs allow “normal people” to invest in the property sector without buying entire properties.

So, if someone wants exposure to hotels, apartment buildings, or healthcare facilities, they can just buy a few shares in REITs that invest in them.

REITs tend to specialize in certain geographies and property types, and some even focus on core , value-add , or opportunistic strategies.

But their unique feature is that they pay little to nothing in corporate income taxes if they comply with certain requirements:

• Dividend Distributions – A “high percentage” of Net Income must be distributed as Dividends. The percentage varies, ranging from 90% in the U.S. to 75% in South Africa to 100% in some countries.
• Revenue or Net Income – High percentages of these must come from real estate sources. It’s 75% of Revenue in countries such as Canada and Germany and 75% of Net Income in the U.S. and U.K.
• Real Estate Assets – A high percentage of assets, such as 75% in the U.S. and U.K. and 80% in India, must be real estate-related.

Since REITs are always buying, selling, and developing properties and issuing Dividends, there are several consequences:

• Constant Debt and Equity Issuances: REITs cannot build up huge Cash balances because of their high Dividends and acquisition/development spending, which creates the need to issue debt and equity all the time. More fees for bankers!
• Alternate Metrics: Selling properties results in Realized Gains and Losses on the Income Statement, which distorts Net Income, and U.S.-based REITs also record huge Depreciation figures on their Income Statements. IFRS-based REITs mark properties to market value, which results in large Fair Value Gains and Losses on the Income Statement, also distorting Net Income.

As a result, you’ll see metrics such as Funds from Operations (FFO) that reverse Gains and Losses and add back Depreciation under U.S. GAAP (some non-U.S. REITs also use this metric but calculate it differently):

Many European REITs use EPRA Earnings, which reverses Fair Value Gains and Losses and adjusts for Deferred Taxes.

Representative Large-Cap, Global, Public Companies: Flutter Entertainment (Online), Entain Plc (U.K.), Caesars Entertainment (U.S.), MGM Resorts (U.S.), Tabcorp (Australia), Penn National Gaming (U.S.), Las Vegas Sands (U.S.), International Game Technology (U.K.), Wynn Resorts (U.S.), and Genting Berhad (Malaysia).

Casinos operate worldwide, but activity is concentrated in a few hot spots, such as Las Vegas and Atlantic City in the U.S. and Macau in Asia.

Online gaming companies are now major players in the market as well, but sometimes they are considered technology or media companies, depending on the bank.

Like retail companies, offline casino operators care a lot about the # of square feet or square meters and the $ per sq. ft. or $ per sq. m figures.

They also manage metrics such as the # of slot machines, # of table games, # of hotel rooms, and # of food and beverage outlets for each property:

Accounting and valuation are fairly standard in this sector because companies do not have to follow the special rules for REITs unless they happened to be structured as REITs.

Since gaming companies are heavily dependent on leases , it’s critical to understand the rules for lease accounting .

EBITDA under U.S. GAAP is not the same as EBITDA under IFRS due to these rules!

M&A deals in the gaming sector are often motivated by geographic expansion , especially since gambling is heavily taxed and regulated by most regions and cities.

Representative Large-Cap, Global, Public Companies: Accor (Europe), Marriott International, InterContinental Hotels, Huazhu Group, Hilton, TUI Group (Germany), H.I.S. (Japan), Shangri-La Asia (HK), and Shanghai Jin Jiang Capital.

You could also include companies like Expedia and Airbnb in this list, but they don’t own or lease properties directly, so we’re not listing them here.

The lodging sector is, in some ways, the opposite of areas like office and industrial properties with long-term leases: there’s almost no revenue visibility because hotels stays are short-term, and the rates are highly variable.

Therefore, hotel operators are much closer to “normal companies without recurring revenue” in terms of risk and potential returns.

Key drivers here include the occupancy rate , the average daily rate (ADR) , and Revenue per Available Room (RevPAR, which equals the ADR * Occupancy Rate).Each company’s business model also differs slightly. For example, does a hotel company own its hotels directly, or does it franchise them out to independent operators? Or does it do a mix of both?

Ownership means more control, brand consistency, and pricing power, but it also incurs higher costs.

Also, does the company simply own/operate/franchise hotels, or does it offer other services, such as guided tours and travel agents?

The more a company depends on these other services, the closer it is to a “normal” services company rather than a real estate-specific company.

As with almost everything in real estate, geographic expansion often motivates M&A deals here:

Representative Large-Cap, Global, Public Companies: Lennar Corporation, D.R. Horton, Sekisui House (Japan), Iida Group (Japan), PulteGroup, NVR, Toll Brothers, HASEKO (Japan), PIK-specialized homebuilder (Russia), Barratt Developments (U.K.), KB Home, Persimmon (U.K.), Meritage Homes, and Taylor Wimpey (U.K. and Spain).

These firms construct and sell homes, usually specializing in a specific home type or geography.

For example, a company might focus on luxury condominium units in the Southeast U.S., while another might build townhomes in the suburbs of the Northeast.

These firms may also offer financing services, so they effectively become lenders in addition to developers.

Demand for new homes is the most important driver in this sector, and it’s affected by everything from the unemployment rate to the family formation rate, wage growth, and the costs of renting vs. owning.

The biggest difference in this sector vs. lodging, gaming, and REITs is that home builders do NOT own or lease their properties for the long term – they build to sell.

Home builders put the homes they’re developing on their Balance Sheets as Inventory , usually split into the “Under Construction” vs. “Finished” categories.

When they sell the homes, they record the sales as Revenue and show the development costs under Cost of Sales or COGS on the Income Statement.

As a result, they cycle through Inventory far more slowly than companies in most other sectors, and the “Change in Home Inventory” may even be a separate line item in a DCF model .

If the company also provides financing, the associated mortgages will appear on the Assets side of the Balance Sheet.

If these operations are significant, banks might even use a Sum of the Parts Valuation or a NAV Model to capture the company’s lending and development activities separately.

For the most part, though, accounting and valuation are fairly standard, so traditional multiples like TEV / EBITDA and methodologies like a DCF based on Unlevered FCF still work.

If you want to see a few differences, take a look at this home builder valuation presentation from Morgan Stanley , based on Brookfield Asset Management’s acquisition of the remaining 30% of Brookfield Residential :

Representative Large-Cap, Global, Public Companies: Greenland Holdings (China), China Evergrande, Daiwa House Industry (Japan), CBRE, China Fortune Land Development, KE Holdings (China), Jones Lang LaSalle, Cushman & Wakefield, Vingroup (Vietnam), CapitaLand ( Singapore ), Vonovia (Germany), Leopalace21 (Japan), IWG, Deutsche Wohnen, and Colliers International.

Everything “miscellaneous” goes in this category, ranging from real estate operating companies to companies that develop all sorts of properties, provide title services, and offer property management and brokerage services.

Most of the big companies in this sector are in China because the construction needs in a country of 1.4 billion people are so vast.

It’s more diversified outside of developers, with representation from countries across North America, Europe, and Asia.

It’s difficult to generalize the analytical differences in this sector because they depend on the company type.

Developers are similar to home builders, while REOCs are similar to REITs but with more flexibility around capital raises and dividends (see our dividend yield tutorial).

Meanwhile, leasing, title, brokerage, and property management firms are closer to “normal companies” driven by transaction volume and fees.

Real Estate Accounting, Valuation, and Financial Modeling

Except for REITs, standard modeling practices, valuations, and transaction models apply to most verticals.

This explains why we have an entire course on REIT finanical modeling , but no such courses on casino companies or home builders.

We also have a full course on individual property modeling, though they are quite different from REITs (still good to know, but less important than entire companies in most investment banking roles):

REIT Modeling

Master financial modeling for real estate investment trusts with 6 global case studies based on REIT 3-statement models, valuations, M&A deals, and leveraged buyouts.

We’ve touched on some of the differences for REITs above, and we even have a crash-course video on REIT valuation .

My short summary would be:

1) Model Drivers and Flow – You start by projecting the company’s “same-store” (existing) properties and then build in acquisitions, developments, and asset sales and forecast the associated revenue and expenses.

2) Key Metrics – As a result of the high Gains and Losses for all REITs and the high Depreciation for U.S.-based REITs, you use alternative financial metrics, such as Funds from Operations (FFO), Adjusted Funds from Operations (AFFO), and EPRA Earnings.

 3) Valuation – You also use multiples based on these metrics, which are all linked to Equity Value. For U.S.-based REITs, the Net Asset Value (NAV) Model is a useful way to value the company based on its Balance Sheet:

It’s less useful for IFRS-based REITs because they mark their properties to market value periodically and do not record Depreciation on them.

You could use a standard DCF model based on Unlevered FCF for any REIT, but a DCF based on Levered FCF and a Dividend Discount Model are also acceptable, given the specific requirements to qualify as a REIT:

4) M&A Modeling – Since all REIT-to-REIT M&A deals involve a significant Stock component, you focus on the Contribution Analysis (Will Buyer A and Seller B own the appropriate percentages of Combined Company C?) and the Value Creation Analysis (Could Combined Company C trade at higher multiples than Buyer A or Seller B separately?).

You also care more about accretion/dilution for metrics such as FFO per Share and AFFO per Share than traditional Earnings per Share (EPS)

5) LBO Modeling – Since REITs constantly issue Debt to acquire and develop properties, the traditional “repay Debt over 5 years” framework doesn’t quite work. Instead, most REIT LBOs depend heavily on EBITDA Growth and Multiple Expansion , and they assume that the company’s Debt load will increase over time.

Outside of REITs, there are some minor differences in the other sectors, but nothing huge; you can get the main ideas from the examples in the next section.

One final note: we are considering only entire companies in this section.

If you want to learn about asset-level analysis, please see our guide to real estate financial modeling .

Example Valuations, Pitch Books, Fairness Opinions, and Investor Presentations

Here are some examples:

Brookfield / GGP – Goldman Sachs

• Presentation – Deal Analysis, Valuation, and Deal Terms
• Updated Valuation Several Months Later
• Fairness Opinion
• Investor Presentation

Ventas / New Senior Investment Group – Centerview and Morgan Stanley

Brookfield / Rouse Properties – BAML

• Presentation – Deal Analysis, Valuation, and Transaction Updates

Equity Commonwealth / Monmouth Real Estate – Goldman Sachs, JPM, and CSCA Capital Advisors

Crown Resorts / Star Entertainment Group (Australia) – UBS and Credit Suisse

• AFR – Article About Deal and Valuation

Bally’s / Gamesys (U.S. and U.K.) – Deutsche Bank and Macquarie

Hilton Grand Vacations / Diamond Resorts International – BAML, PJT Partners, and Credit Suisse

• Lender Presentation

Marriott / Starwood – Deutsche Bank, Citi, and Credit Suisse

Lennar / CalAtlantic – JPM and Citi

Brookfield Asset Management / Brookfield Residential – Morgan Stanley

Galliford Try / Bovis Homes (U.K.) – Lazard, Numis, HSBC, Rothschild, and Peel Hunt

Real Estate Investment Banking League Tables: The Top Firms

Banks with large Balance Sheets tend to perform well because so many real estate deals are financing-related.

So, you’ll see firms like Bank of America Merrill Lynch, Citi, JP Morgan, and Deutsche Bank at or near the top of the league tables .

Goldman Sachs and Morgan Stanley are also among the top performers, and you can add RBC, Wells Fargo, and Barclays to the top 10-15 list.

MS and GS tend to be comparatively stronger in M&A and advisory work, and the others are stronger in equity and debt.

Among the elite boutiques , both Evercore and Lazard perform well, focusing on M&A advisory work.

In terms of other boutiques in the sector, everyone likes to mention Eastdil Secured .

Wells Fargo used to own the entire firm, but they sold the private division while retaining the “public market real estate investment bankers .”

As a result, the current iteration of Eastdil Secured, while a top real estate firm, is not a true “real estate investment bank” that advises entire corporate entities.

On that note, there aren’t many true boutique banks that specialize in real estate; many firms that call themselves “real estate investment banks” are more like debt and equity brokers for property deals.

A few legitimate names include CS Capital Advisors (healthcare and commercial real estate), Ziegler (senior living, among other verticals), and Browns Gibbons Lang & Company (healthcare real estate).

Exit Opportunities

Real estate investment banking offers a good number of potential exit opportunities : REITs, real estate private equity, gaming/lodging/development companies in corporate finance or corporate development, RE-focused hedge funds, and more.

Also, there are vastly more REPE firms than private equity firms are specializing in financial institutions or energy if you compare real estate to the other “specialized” sectors.

You could potentially even move into a real estate lending , real estate debt fund , or CMBS role.

The bad news is that your options are still more limited outside of real estate, even if you happen to have worked with “standard companies” in the sector.

Industry-focused firms and groups still like to recruit candidates with matching experience, so a healthcare PE firm will always prefer healthcare IB Analysts .

The other bit of bad news is that real estate investment banking doesn’t necessarily set you up for all real estate-related opportunities.

For example, property development would be a stretch coming from REIB because the skill sets are so different; you don’t learn the “nuts and bolts” of construction when you work in Excel and PowerPoint all day.

Pros and Cons of Real Estate Investment Banking

This article has been long and detailed, so I’ll make it even longer by including this pro/con list at the end:

• It’s a fairly stable sector in which different verticals always come in and out of favor, meaning that overall deal activity stays in a similar range from year to year.
• Since REIB is very specialized , you’re more likely to contribute to all aspects of deals than in other sectors with more “standard” companies.
• The group also gives you access to more exit opportunities than other specialized sectors, such as FIG. That said, it’s still worse for exits than a truly “general” group such as healthcare or technology .
• You’ll get exposed to a wide variety of deal types because real estate companies frequently raise debt and equity and buy and sell individual assets.
• You could get stuck working on a lot of capital markets deals , especially at the bulge bracket banks ; these deals tend to be less interesting than M&A and Restructuring work.
• If you’re at a smaller firm, you will do more M&A advisory work, but you’ll also be less likely to work on the biggest, most complex deals.
• Since real estate is a more specialized group, it’s not the ideal place for exits into traditional private equity firms and hedge funds (only ones that focus on real estate).

So, you may not quite become “indispensable” after working in real estate investment banking.

But of the more specialized groups, it’s the best option if you like the sector, but you’re not 100% certain you want to commit to it for the long term.

In other words, your career will be a lot more “mobile” than the assets you work with.

Further Reading

If you liked this article, you might be interested in How to Get into Commercial Real Estate: Side Doors, Front Doors, Steppingstones, and Career Paths or The Real Estate Pro-Forma: Full Guide, Excel Template, Explanations, and More.

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

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26 thoughts on “ Real Estate Investment Banking: The Best Way to Make Yourself Indispensable? ”

I have a question regarding making a lateral move from corporate banking to REIB in the UK.

On average, I saw people making a successful lateral move within a 4 to 6 years time frame. I am not sure if I have missed anything but I guess the UK market is way smaller than the US. So people move around slowly as less opportunities are available.

I am currently working in the CMBS team in a big 3 CRA, and I am thinking if I should move to Corporate Banking with a real estate focus.

My concerns are as the following:

1. As the interest rate is still at a high water mark, alongside with tons of layoff in big banks, I am not sure if I can still keep job even if I get it.

2. Corporate Banking has no exit options to the buy side or credit research if the lateral move plan fails

3. There is no guarantee that a corporate banking job would lead to a IBD role. Let’s say if I stick with Structured Finance for long and move to the same field in a large bank. I think the salary will be higher than corporate banking as it is closer to Sales and Trading.

Would you still recommend people like me to make the switch to Corporate Banking, with the end goal to IBD?

Any feedback will be appreciated.

I don’t really think it makes sense to move from CMBS at a Big 3 CRA to corporate banking. Yes, it brings you closer to IB, but it also has all the downsides you mentioned, and I think you could probably join a capital markets-related group at a bank directly from your current job, even if it’s not official “investment banking.”

Unless you plan to use IB solely to win other exit opportunities, such as private equity, your plan to potentially move into Structured Finance makes more sense (or even the CMBS team at a bank if the CRE market ever recovers…).

Thanks for the advice Brian. Yes the CRE market is in trouble at the moment and the CMBS transaction volume is low atm. I would like to settle in private equity or private credit eventually. So I think IBD is a necessary step to achieve that. However, the last thing I want is getting stuck in Corporate Banking for long. If I can move from structured finance to IBD (DCM or Lev Fin) internally in a bank, that would be ideal. Do you think that is possible?

It’s possible but not that common/likely because Structured Finance is quite specialized. But if you move quickly (within 1-2 years), sure, it is more likely.

I am an incoming analyst at a solid BB (Barclays/Bofa/Citi) who wants to do generalist PE (Consumer, Industrials, Healthcare etc.). However, I am in a niche group (REGL), although it is one of the top within its industry.

I know that the exits from my group to MF REPE are good. However, I haven’t really seen anyone go to generalist PE from my group. I’ve only seen one and they went to a lower middle market fund. I was wondering if the group I am in will restrict me from getting interviews at UMM funds for generalist?

Should I do On-cycle PE recruiting in my current group, or should I try to lateral after 6-12 months to a more sought after group, like EVR M&A, then do off-cycle PE recruiting there? Thanks!

Yes, if you’re in a specialized group such as RE, you will have a lower chance of winning generalist PE offers. If you really want to win generalist PE offers at large funds, you should try to transfer to a more generalist group first and then go through PE recruiting there. The on-cycle PE recruiting process is increasingly crazy and not worthwhile for many candidates, as it now starts comically early, and many funds end up having to use off-cycle or later recruiting to get enough people anyway.

Thanks. Does this sound like a good plan? I do real estate recruiting at my current bank and if I get into Blackstone REPE then just take that.

But if I don’t get that then try to lateral to a different bank. Also, how far into the job would you start trying to lateral. 3 months?

Yes, you could do that. Generally it’s best to wait around a year to make a lateral move unless you can get a lot of deal experience before that.

Hi Brian – I’m an international male with a top European Master in Management (no US degree). I have 2 years of work-ex at a mid-market Real Estate PE firm in NYC. I’m targeting top US MBA programs to become a Real Estate IB Associate in NYC in 2026 (2024 MBA intake + 2 years). Reasons are better pay (crossing $300k) + working on larger deals + deal diversity (my current firm is a niche player).

My confusion is this: should I get an MBA for better comp + long term growth even when I don’t necessarily want to move out of Real Estate? I’m fine with RE Investing in NYC throughout my career but am unhappy with the current comp ($100k-$150k all-in as an analyst; I will get carry though). Switching firms is not an option for 2-3 years because of visa restrictions. I’ll get promoted to Associate in early 2024 with comp in the $150k-$200k range.

Long term goal is Real Estate Investing / Investment Banking in the US.

I don’t really understand why you would need an MBA in this case because if you are an REPE Associate, you should be able to move over to REIB groups via lateral hiring. They may not give you full “credit” for your work experience, so in that sense an MBA would help, but otherwise, I don’t see the point in your case. An MBA would make more sense if you wanted to move out of real estate into some other sector.

I’m also not sure that an MBA would help you with visa issues because regardless of whether or not you do the MBA, you’ll have to find a large bank that is willing to sponsor you.

Hi Brian – I have been out of college for over 6 years and have spent my career in multiple Strategy roles in Banking.

I am considering pursuing an MBA to break into REIB. My only concern in whether my lack of previous REIB and/or IB experience will work against me. Any thoughts you can share on my situation will be greatly appreciated.

No, not really. MBA degrees are meant for career changers who want to win roles in industries such as IB and consulting. A pre-MBA internship or something else related to deals before the program would definitely help, but it may not be necessary if you’ve already had the strategy roles and do enough of the fit and technical prep on your own.

Thanks for this info. What are your thoughts on doing REIB as a post-MBA associate for a year or so to move to an asset manager / PE fund? Or this something that I could directly out of a (T15) MBA?

Moving to PE is always more difficult as a post-MBA Associate, but it might be a bit easier within RE because it’s specialized and the talent supply/demand are sometimes mismatched. If you don’t have IB or other deal experience prior to the MBA, I don’t think you can move into PE directly from the program.

Thanks for posting this insightful article. I was wondering is Is MS in Real Estate Analysis and Development a good way to enter in REIB and Will MS in Real Estate Analysis and Development from Penn State help me enter REIB?

Your university brand name/reputation/alumni network matter far more than the specific degree. So, Real Estate anything for a major is better than a non-RE major if you want to get into REIB, but a top school will beat a lower-ranking school any day of the week. Penn State is not a target for IB recruiting, so that is the main issue here. However, it could lead to other roles within RE, which you could then leverage to get into REIB eventually.

Thank you for these articles. I was wondering if there any tips on what to read if I’m interested in REIB? Thanks in advance!

Thanks. Unfortunately, I’ve never found great books on this topic. There are plenty of sources on individual property deals and analysis and property modeling, but very little on analysis at the corporate level in RE. But I’ll post anything useful I find here.

Below is my current situation, in London.

Super Target School undergrad (wanted to get into IB but poor grades in first year so no internship won, hence no FT role) —> Boutique REPE house acquisitions role (involvement in several high value transactions 3+ years, very specific RE niche) —> Huge global asset manager direct RE investments role (<6 months, specific RE niche coverage, but different niche to boutique role).

I am unsure of my next move assuming my end goal is Blackstone, Apollo, Brookfield. Do I have a chance to lateral in at a year 1 of 2 level into an REIB team, reset the clock, and then have a crack at mega funds after 2 years? I am confident that I could find a role in a tier 2 REPE house, but based on my research, it is not particularly likely to hop up the fund ladder from boutique to megafund, although we are talking about the thin end of the bell curve here, so nothing is “likely”.

Note – Hard to recall the exact timeline, but I have been a reader on this website for at least 10 years. Some good advice over the years, I should’ve listened to it lol….

I don’t know why, after years of working in REPE / RE investing, you’d want to return to REIB and work longer/more stressful hours, and I don’t think they would accept you as an Analyst at this stage. If your end goal is one of the mega-funds, then you should recruit for a larger REPE firm or group and then work your way up from that. Yes, it’s still difficult to get into the mega-funds, but it’s also difficult even if you’re at one of the top banks (the vast majority of Analyst do not do it).

If you can choose an industry coverage group, which would you choose in 2021 to better position for an exit?

Well, what do you want? What exit opportunities are you interested in? Which industry or industries do you want to work in? You should pick something that aligns with those. If you want to do VC or startups, tech or healthcare. If you want to do private equity, groups like M&A, Leveraged Finance, or industrials. There’s no correct answer because it depends completely on your desired exit opportunity.

Any goss on latest analyst pay increases across the street? Could be worth a write up

I added a note in the article on IB Salaries, but there isn’t much to say yet. “IB jobs have become less appealing, so banks increased base salaries by $15K+. Base salaries are now higher for most Analysts through VPs except for a few banks that haven’t yet increased them. The effect on year-end bonuses remains to be seen.” That’s the article.

Thanks very much for posting these interesting articles. Would you be able to release an article that discuss on “future-proofing” IB coverage groups? Thanks!

Thanks. Not sure what you mean – nothing is really “future proof” because unexpected, dramatic events can change industries quite a bit. Just look at what happened in 2008, 2016, 2020, etc. Some groups are more or less cyclical than others, but even that is hard to predict, especially when a recession is caused by something other than a standard drop in economic activity.

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REITs Complete Institutional Real Estate Portfolios: A Case Study

With contribution from Chris Battista, LaSalle

As the economy evolves, so too does the real estate that houses the economy. One of the dominant themes among institutional real estate investors of the past few years has been the shift toward “alternative” property types. These “alternative” or “niche” property types, ranging from cell towers and data centers to health care and self storage, are hardly alternative or niche in REIT markets. REITs have been on the forefront of bringing new and emerging property sectors into the institutional real estate space. In fact, today, the share of the FTSE Nareit All Equity REIT index outside of the core four property types (office, retail, residential, industrial) is over 60%.

Because REITs offer access and expertise in new and emerging property sectors, institutional investors are increasingly considering REITs as part of a completion portfolio strategy, as discussed in the Winter 2023 issue of PREA Quarterly and the March 2023 issue of Investing in REITs .

A LaSalle Securities case study provides an illustration of how integrating REITs into an existing real estate portfolio can dramatically change the sector composition of the portfolio. The client is a U.S. health care system in the Northeast, which has total assets ranging from $4-5 billion and a real assets allocation (including real estate) of 3.0-5.5%.

LaSalle Securities’ client was invested in several private real estate funds with heavy retail and office exposure. The client expressed concern to LaSalle Securities about the performance of the funds, as well as the lack of exposure to the new economy or niche property types. The LaSalle Securities team collaborated with the client to map the allocation of their existing real estate portfolio, identify the gaps, and then create a custom universe of REITs that addressed those gaps. The LaSalle Securities team then used this custom universe to “complete” the client’s portfolio.

The pie graphs above detail how LaSalle Securities proposed to reconfigure their client’s existing real estate allocation to better align with today’s real estate universe. As shown on the leftmost pie in the graphic, the existing private allocation was 100% allocated to core-four property sectors, with the largest allocation being office at 38%. LaSalle Securities constructed a completion portfolio (shown in the center pie) comprised of REITs focused on cell towers, health care, data centers, self-storage, triple-net lease, non-apartment residential, life sciences, and other sectors. The proposed real estate portfolio (shown in the right-hand pie) provided a more complete exposure to real estate that houses the modern economy.

This case study shows how LaSalle mapped the look-through exposure of the client’s private funds and successfully designed a REIT allocation which was ultimately used to “complete” the client’s real estate portfolio.

Read additional portfolio completion case studies

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• City of Austin Employees’ Retirement System (COAERS)
• CenterSquare

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Get nareit market commentary blog posts delivered straight to your inbox., you might also like..., what's a reit.

REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors. These real estate companies have to meet a number of requirements to qualify as REITs. Most REITs trade on major stock exchanges, and they offer a number of benefits to investors.

Why Invest in REITs

REITs historically have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation. Their comparatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns. These are the characteristics of real estate investment.

About Nareit

Nareit serves as the worldwide representative voice for REITs and real estate companies with an interest in U.S. real estate. Nareit’s members are REITs and other real estate companies throughout the world that own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service those businesses.

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To develop the Climate Change Resilience Standard, we used forward-looking, third-party climate risk data to evaluate our global portfolio’s exposure to climate and extreme weather risks. These risks include floods, sea-level rise, extreme windstorms, wildfire, heat stress, water stress, and earthquakes. We also inventoried our entire portfolio for property resilience—the presence of features and practices such as risk awareness, resilience management, emergency management, business continuity, and building attributes that help mitigate climate risks. The resulting Climate Change Resilience Sustainable Building Standard incorporates risk and resilience practices into property operations. It enhances property resilience through a range of initiatives, including education, emergency planning, and resilience assessments and improvements. To support our property teams with education and implementation of this new Standard, we provided company-wide training and a Property Resilience Toolkit. The Toolkit helps teams screen and prioritize resilience improvements based on their climate risk exposure and existing resilience measures and practices.

GHG Management and Planning

Reducing our carbon footprint is critical to the global transition to a low carbon economy and to our long-term success. Our internally-created Carbon Management Working Group developed the GHG Management and Planning Standard to help asset management and property operations teams to create emissions reduction plans. These asset-level plans aim to support meeting our long-term GHG emissions reductions target. Integrating education, opportunity identification, and emissions reduction planning into operations allows our property and asset management teams to reassess the practical and financial implications of reduction pathways. In 2022, we plan to globally roll out expert guidance and proprietary tools to help each asset build their decarbonization plan and budget. 1 The case study/ies shown here are for illustrative purposes only, do not represent all of the investments made, sold, or recommended for client accounts, and should not be considered an indication of the ESG integration, performance, or characteristics of any current or future Manulife Investment Management product or investment strategy. Manulife Investment Management conducts hundreds of ESG engagements each year but does not engage on all issues or with all issuers in our portfolios. We also frequently conduct collaborative engagements in which we do not set the terms of engagement but lend our support in order to achieve a desired outcome. Where we own and operate physical assets, we seek to weave sustainability into our operational strategies and execution.

The case studies shown are a sampling across issues and geographies. Our approach to ESG investing and incorporation of ESG principles into the investment process differs by investment strategy and investment team. It should not be assumed that an investment in the company discussed herein was or will be profitable. Actual investments will vary and there is no guarantee that a particular fund or client account will hold the investments or reflect the characteristics identified herein. Please see our ESG policies for details

From the ground up

As a long-term owner, we know it’s critical to manage ESG throughout the lifecycle of our assets. In 2021, we formalized our approach to ESG integration into new developments in recognition that our development pipeline presents one the of the earliest opportunities to manage risk and capitalize on opportunity.

Our approach integrates ESG considerations throughout the entire development process, from early planning and design stages, through to construction and eventual handover of the completed building. Integrating ESG from the start of a new development helps us:

• Get ahead of increasingly stringent regulations
• Ensure completed buildings meet tenant and investor expectations
• Position assets to contribute to ESG goals and performance of our standing portfolio
• Apply a forward-looking lens to building design and performance so our assets can positively contribute to the broader society

Integrating ESG into developments also compels us to consider the construction sector’s role in the transition to a low-carbon economy and to more fully appreciate the importance that indirect impacts, such as embodied carbon from building materials, can have on the climate.

To enable our team to apply our approach, we have created a suite of proprietary tools. These include design requirements that address minimum energy performance, consideration for net-zero design, embodied carbon assessments and contributions to de-carbonized transportation, biodiversity, and health and well-being. The tools also focus on our development activities, such as working with like-minded development and construction partners, considering the environmental impacts of site selection, ensuring a safe construction site, and gathering and addressing input from local communities. We’re currently gathering market feedback from development partners and other stakeholders so we can continue to fine tune our minimum design requirements.

We’re excited by the positive feedback we’ve received so far from the industry. It’s clear there’s enthusiasm to collaborate on our ambitious low-carbon goals.

Sector leadership

In 2021, we achieved a new milestone: We were recognized by GRESB as a Sector Leader, ranking first in our peer group for our global real estate portfolio. 1

GRESB is the global standard for assessing the ESG performance of real estate companies and funds. By scoring and benchmarking a collection of standardized data, GRESB provides investors with transparency on how well companies and funds are managing material ESG issues, such as energy consumption, greenhouse gas emissions, corporate governance, and employee and tenant satisfaction and well-being.

In 2021, over 1,500 entities participated in the GRESB assessment. This represents nearly 117,000 individual assets with a total value of $5.7 trillion USD 2 . Sector Leaders are the best performers across the entire GRESB assessment, categorized by sector, region, and nature of ownership.

Our global portfolio covers our direct real estate investments around the world, including all funds and our General Account. GRESB evaluates our management of these assets through formal ESG policies, processes, and programs we have in place. Furthermore, GRESB rates our assets’ actual ESG performance to determine the impact of our efforts and initiatives.

Our 2021 results highlight the strength of our ESG integration practices. Contributing to this top ranking were our portfolio-wide reductions in greenhouse gas emissions, energy and water consumption, as well as improvements in waste output and diversion.

Manulife Investment Management has participated in GRESB since 2018. The annual assessment is a crucial part of our ESG strategy. It provides on-going transparency to our investors, allows us to better understand our strengths, and helps identify areas where we can continue to improve. We look forward to continued participation in 2022.

1 Based on GRESB results released October 2021 cover the 2020 time period. GRESB Sector Leaders are the best performers by sector, region and nature of ownership from across the GRESB Assessments. The entity with the top score, as well as the entities with a score within 1 point of the top score in a category are recognized as Sector Leaders. Most current data shown. Manulife Investment Management paid a fee to be considered for the ranking. gresb.com

2 Please see: gresb.com

Fitwel Viral Response Module Certification

In 2021, we secured the Fitwel Viral Response Module (VRM) certification with distinction at the entity-level. 1 This achievement is part of our commitment to furthering sustainability efforts across our real estate portfolio and the focus on the ongoing health and well-being of our tenants, employees, and partners.

Fitwel is the world’s leading certification system committed to “Building Health for All®.” Originally created by the U.S. Centers for Disease Control and Prevention (CDC) and U.S. General Services Administration, Fitwel is a rigorous, third-party healthy building certification that sets the industry standard for evidence-based strategies to promote positive health outcomes for building occupants and communities.

Receiving entity-level certification signifies Manulife Investment Management’s consistent wellness, design, development, and operation policies across our North American portfolio. These rigorously reviewed policies and procedures for safe and healthy infrastructure will be implemented across our 58.5 million square foot North American real estate portfolio.

In 2021, over 20 properties achieved Fitwel Viral Response approval in North America 2 (which signifies that a property has aligned with the specified practices and policies detailed in Manulife Investment Management’s Viral Response Module certification). We’re proud of our achievements and look forward to the continued implementation across our North American real estate portfolio.

1 Certification achieved in 2021, for 2020-2021 efforts, by the Fitwel Viral Response Module for our efforts to ensure our properties are ready for a safe and healthy return to work. Certification is valid for 12 months. Please see fitwel.org/viral-response-module

2 Total rolling certifications since 2020, as of December 31, 2021, by the Fitwel Viral Response Module for our efforts to ensure our properties are ready for a safe and healthy return to work. Certification is valid for 12 months. Please see fitwel.org/viral-response-module

Requirements for our third-party real estate managers

In 2021, we made the strategic decision to migrate our US real estate platform to third-party property managers to oversee the operation of our buildings.

To ensure our standards and reporting requirements are upheld in the highest manner, we developed a rigorous selection process for third-party property managers which specifically take into account sustainability considerations in accordance with the Manulife Real Estate Sustainable Procurement Guidelines.

Our property management agreements act as a roadmap for implementation of our sustainability practices. We closely oversee third-party property managers and require them to adhere to our proprietary sustainability policies, to provide updates twice per year according to our own Sustainable Building Standards, to provide utility bills on a monthly basis and to provide requested metrics for information on, for example, waste audits and diversion reports, energy audits, refrigerant or diesel consumption, tenant engagement activities, and occupancy counts.

We also provide third-party property managers with the Sustainability in Asset Management Checklist to use in developing annual property reviews, budgets and capital plans. The Checklist does not prescribe specific practices but provides a structured means of addressing sustainability risks and opportunities and ensures sustainability budget items are not overlooked. We’ve also developed an annual third-party property manager scorecard to rate compliance with property management agreements, including a qualitative assessment on delivery against our expectations.

The migration to third-party property managers will help us achieve a significant business objective—to grow our geographical footprint across the United States. Simultaneously, liaising with property managers, who interact with other real estate investment managers, promotes industry collaboration and alignment on best sustainability practices.

Creating community

To say it was challenging for all of us to stay connected in 2020 is an understatement. But that only seems to have inspired our Montreal office portfolio team to devise even more innovative ways to engage their tenants and the local community.

To stay in touch with tenants, the team invented a host of fun, new events, all of which were delivered safely through virtual platforms. One week it was a cooking class, the next, a recipe exchange – the team even organized a holiday decorating contest virtually. And not surprisingly, there were several specially curated events aimed at maintaining tenant health and wellness, including all-important mental health.

Our Montreal team also recognized the importance of supporting vulnerable communities through these difficult times. Throughout the year, they joined forces with local organizations to deliver food baskets filled with honey from their 68 on-site hives and nearly a ton of produce from their rooftop gardens. During the holiday season, as part of our real estate team’s Green Glove initiative, the team coordinated with a local food retailer to purchase prepared meals and groceries that were then delivered to local community organizations.

The team’s initiative, energy and creativity are a testament to their commitment to continuous improvement, no matter what obstacles are thrown in their way.

For all their efforts, we were delighted to honor the team with the Community Engagement Leader Award at our 2020 Real Estate Sustainability Awards. Well done, Montreal.

Advancing health and wellness

We are a company with roots in the promotion of public health. Ingrained in our business, wellness is an important part of our sustainability vision and one of our five Sustainability Commitments.

Two of our impressive sustainability performers – Manulife Place in Edmonton and The Michelson in California 1 – added a wellness “stamp of approval” to their record in 2020 by qualifying for the Fitwel health and wellness certification. Originally developed by the U.S Centers for Disease Control and Prevention, Fitwel is the leading global building certification focused on occupant health and well-being, evaluating a wide spectrum of critical features – indoor air quality, fitness amenities, access to green spaces, accessibility and alternative transportation, among others.

The two buildings offer a suite of health and wellness programs and amenities that supported their certification, including fitness centers, nearby hiking and walking trails and strategies to optimize indoor air quality. Ultimately, certification demonstrates how committed our property teams are to ensuring we provide safe and healthy spaces. 

One effect of the  COVID-19 pandemic was to remind us of the impact buildings have on health, and to reinforce the need to operate our spaces to help ensure safety for our stakeholders. In response, we developed Manulife Investment Management’s Return to Office program, aligning ourselves with global health authorities and local government regulations. Key to the program is our internal Return to Office Playbook outlining our recommended measures, policies, and procedures to ensure the safe and ongoing return of employees, customers and partners to our spaces. The playbook was reviewed by an expert healthy buildings consulting firm, 9 Foundations Inc., founded by Dr. Joseph Allen, who, along with his team, provided recommendations for aligning our playbook with industry best practices, as well as occupational health and safety fundamentals. Then, specifically for our tenants, we prepared a Tenant Guidebook that provides an overview of the policies and procedures we are implementing across our portfolio.

1 The specific real estate investments identified are not representative of all of the real estate investments purchased, sold or recommended, and are included for illustrative purposes only. It should not be assumed that the investment in the real estate holdings identified were or will be profitable.

Cutting corporate carbon

Our aim is to reduce greenhouse gas (GHG) emissions across our portfolio by 80% by 2050. 1 Last year, in support of this, we undertook two key initiatives.

Firstly, we conducted a “deep carbon retrofit study” across our corporate real estate buildings (i.e., buildings that we as a business occupy). This study examined the current GHG emissions across these properties in North America and Asia.

With the combined expertise of our own technical staff and that of third-party building engineers, we performed a thorough assessment of building systems. This allowed us to identify retrofits that could deliver relatively speedy carbon reductions and to devise longer-term strategies for more sizable emission cuts. Measures include efficiency projects, switching to cleaner fuels and generating renewable energy on-site.

The study is proving to be an invaluable component of our carbon reduction program, not only painting an accurate picture of our current corporate carbon output, but also providing a clear path forward, detailing effective solutions that can be incorporated into our planning and forecasting.

Reducing carbon also involves managing the space we lease, which means influencing other landlords to green their spaces. In 2020, we also incorporated sustainability into our corporate leased space selection process, enabling us to choose the best-performing properties and open a dialogue with prospective landlords on how we can collaborate to achieve environmental outcomes. We are continuing this momentum in 2021 by updating our green lease guidance so that teams can include these collaboration agreements in their leasing documents.

Together, these two corporate real estate initiatives are boosting our ability to meet our total portfolio greenhouse gas reduction target.

A Canadian portfolio milestone

In 2020, we reached an important milestone: 100% of our Canadian managed funds now boast a green building certification. That’s over 19 million square feet that meet a minimum threshold for sustainability.

This achievement is largely due to our country-wide support for properties with BOMA BEST , Canada’s largest green building certification program, which requires that our properties adhere to 16 sustainability “Best Practices” 1 – everything from energy management to green cleaning.

Many of our Canadian properties have been recognized with other green building certifications, among them LEED (overall sustainability performance), Energy Star (energy efficiency), and Fitwel (health and wellness).

Now with over 80% of our global portfolio carrying a green building certification, this year we plan to improve our global certification base by expanding our BOMA BEST efforts into the United States. 2

Green building certifications are important to our tenants, and many other stakeholders as well – they’re real evidence that we’re demonstrating best-in-class sustainability management.

1 For more information on BOMA BEST 16 sustainability “Best Practices”, visit: bomacanada.ca/aboutbomabest

Preparing for change

It is expected that climate change will increase both the severity and frequency of many natural disasters and meteorological hazards – acute events like flooding and storms, as well as chronic conditions like drought and rising temperatures. 1

In 2019, we began evaluating physical climate change risks 2 to our properties by piloting a “climate value at risk” model. We also contributed to a scenario analysis and guidance report produced as part of our membership in UNEP FI’s real estate TCFD pilot project.

Building on this momentum, in 2020, we conducted our own portfolio-wide risk study. Drawing on third-party sources combining both historical data and forward-looking climate model outputs, we identified seven distinct risks – floods, extreme windstorms, wildfire, sea-level rise, drought, heat stress, and earthquakes – and then produced comprehensive risk exposure profiles out to 2040.

Complementing this detailed understanding of our risk exposure, we also surveyed our entire portfolio for resilience measures – property features and practices that help us prepare for and mitigate these physical climate change risks.

We now have an inventory of standard resilience measures that we are working to implement and track across our portfolio, primarily by adding a new resilience standard to our existing proprietary Sustainable Building Standards.

Assessing both our risks and resilience aligns us with the recommendations of the TCFD, but more importantly, it helps us manage long-term risk – the right strategy for a responsible building owner.

To learn more about our approach to climate change management, see our TCFD report on page 64 of our Manulife Investment Management Sustainable and Responsible Investing report .

1 Source:  https://www.unepfi.org/publications/changing-course-real-estate-tcfd-pilot-project-report-and-investor-guide-to-scenario-based-climate-risk-assessment-in-real-estate-portfolios/

2 Physical climate change risks include heat and water stress, extreme precipitation, cyclones or storms, and rising sea levels.

Steve Cruttenden

When it comes to building operations, Steve Cruttenden is the expert. Steve has worked for Manulife Investment Management for over 30 years and, as director of technical services, he ensures all our buildings—whether suburban mixed-use or AAA downtown offices—operate as efficiently as possible. Efficient buildings save money for our tenants. For example, two of Steve’s projects saved tenants at 8 Cross Street, Singapore, and 17911 Von Karmen Avenue, California, $250,000 and $41,000, respectively. 

Together with our entire technical services team, Steve is one of the key reasons our buildings operate above industry standard when it comes to energy efficiency. 

One Bay East, Hong Kong

Manulife Tower at One Bay East is a Class A office building located in the emerging Kowloon East business district of Hong Kong. Housing Manulife’s Hong Kong corporate offices, the tower is certified LEED Gold and the office space fit out is LEED Platinum certified. 

One Bay East has also won the Royal Institute of Chartered Surveyors Award for Sustainability Achievement of the Year twice, first in 2016 and most recently in 2018. This award recognizes buildings that use innovative technology and teamwork to deliver measurable environmental benefits. 

For One Bay East, this includes initiatives that:

• Promote healthy occupant working, living, and eating through behavioural change campaigns
• Achieve energy and cost savings of up to 16% with our Central Chiller Plant Optimisation system
• Educate employees and other stakeholders through information sessions and guided tours that demonstrate innovative technologies and strong building performance 

Giving back in Ottawa

Supporting our local communities is part of who we are. We believe that giving back to the places we live and work strengthens our teams and enriches our employees’ lives. We also believe that access to safe and affordable housing is a basic human right, and we're pleased to partner with others who share our values.

Started in 2009, Habitat for Humanity’s Women Build Day brings participants of all genders together in a shared mission to help families in need of a decent and affordable place to call home. It promotes spirit, empowerment, solidarity, fun, learning, and pride—all while working alongside future Habitat homeowners to build new affordable housing.

Ten determined women within our Ottawa office saw the importance of this initiative and picked up their hammers to join the effort. In addition to volunteering their time, the team also coordinated the collection of a monetary donation.

It's because of their meaningful contribution that local Ottawa families will have a safe place to call home, and we're proud to see them sharing their humanity.

MicroHabitat

In 2017, Manulife Investment Management partnered with Alvéole to install honeybee hives at many of our properties across North America. To further support our honeybees and make use of additional space on our rooftops, we extended our partnership to MicroHabitat—a local organization specializing in urban farming. In 2019, five of our downtown Montreal properties installed an urban gardening system on their remaining rooftop space. These gardens consisted of a variety of organic fruits, vegetables, and herbs that were cared for daily and watered by a custom-built irrigation system.

Our seasonal growing efforts were extraordinary: 2,500 plants and 1,500 pounds of fresh fruits and vegetables were harvested and donated to local community organizations, including Breakfast for Learning. We also held specialized garden tours and hands-on workshops for our tenants, which promoted the importance of supporting our local communities and food sources.

Given the outstanding success of this program, we'll be examining how this can be expanded across additional buildings in North America with other local partners.

Vancouver's holiday food bank

During the 2019 holiday season, the property team at the Railyard Mall in Merritt, British Columbia, partnered with the Upper Nicola Band and the Upper Nicola Valley Food Bank to make a positive difference in local communities.

From mid-November to early December, the team provided a vacant unit rent free to the Upper Nicola Band (UNB)—a community of eight First Nation reserves. The UNB used the space to raffle off 15 decorated Christmas trees to support community literacy programs and volunteer firefighters.

For our part, we promoted the UNB's initiative by inviting our tenants and community organizations to visit the space. All in all, the UNB raised a total of $40,000.

Building on this success, we then offered the rent-free space to the Upper Nicola Valley Food Bank. They used it throughout December to assemble over 300 holiday hampers filled with fresh fruit and vegetables, warm clothing, and small gifts for members of the community.

1600 Carling Avenue, Ottawa, ON

In January 2019, 1600 Carling Avenue made history as the first building in Canada to become certified under the LEED version 4.1 (v4.1) for Building Operations and Maintenance.

With v4.1, LEED has streamlined certification by focusing on five data-driven performance outcomes: transportation, water, energy, waste, and human experience. The new methodology streamlines the credits and prerequisites, making certification—and recertification—much more straightforward.

Drawing on lessons learned from 1600 Carling, we created an internal LEED v4.1 certification guide and supported teams across Canada to certify another 15 buildings. This included the first Canadian LEED v4.1 Platinum recertification at 55 Metcalfe, also in Ottawa.

Our new LEED program provides better visibility into our buildings’ performance and empowers property teams to collaborate more effectively with tenants. Based on our success with the program, we plan to continue the roll out across Canada and the United States in 2020.

The Michelson, Irvine, CA

Since 2016, The Michelson, a LEED Gold-certified property in Irvine California, has leveraged a state-of-the-art battery system known as Powerpack to save on energy.

Built by Tesla, Powerpack is a fully integrated, AC-connected energy storage system that allows our property management team to reduce peak electricity demand. The system’s batteries are charged during low demand periods when energy rates are cheaper. Then, during peak demand times when costs are higher, the Powerpack draws on the stored energy to power the building. Managing demand in this way reduces our electricity bills by an average of 9% each month, with some months seeing reductions of up to 16%. This battery system not only helps to reduce our operating costs, it also reduces the need for new energy generation capacity.

We're proud to support California’s ambitious emissions reductions target and to be part of the state’s transition to sustainable energy. With results such as this, The Michelson is a model for future operational improvements across our portfolio.

800 Collins, Docklands

Located in the Docklands, one of Melbourne’s most innovative central business district developments, 800 Collins has always been an attractive commercial property. Now that it’s certified Gold by WiredScore, 800 Collins can guarantee its tenants will receive the digital connectivity they require.

WiredScore certification is a commercial real estate rating scheme that empowers landlords to understand, improve, and promote their buildings’ digital infrastructure. This is critical to support tenants who increasingly demand fast, reliable, connectivity to operate their businesses. All over the world, Wired certification pinpoints buildings that demonstrate optimal internet and telecommunications infrastructure.

Among the many innovative features that earned 800 Collins its Gold certification are six fibre providers, advanced cable containment pathways to protect against service disruption, and the physical and digital capacity to accommodate tenant needs and technologies of the future.

Not only that, 800 Collins is a strong energy performer. Multiple sustainable features, including a gas-fired cogeneration plant that produces around 30% of the building’s electricity requirements, has earned the property a NABERS energy rating of 5.0 and a 5-star Green Star v2 Office Design rating from the Green Building Council of Australia.

Hats off to the property team, which worked hard to ensure 800 Collins continues to offer a premier commercial real estate experience. 

980 Howe, Vancouver BC

Kudos to our team at 980 Howe! This 16-story, AAA office building in downtown Vancouver was recognized as "Best in Class" in BOMA’s first-ever Net Zero Challenge Awards.

This award recognizes industry-leading buildings that are progressing toward net zero energy and carbon. Net zero means that the total building energy use is minimized and provided by renewable sources.

As part of BOMA’s net zero challenge program pilot, the team at 980 Howe worked with BOMA to showcase climate change mitigation and adaptation. In addition to energy efficient systems, 980 Howe uses free and passive cooling during shoulder seasons and, for additional savings, has occupancy and daylight harvesting sensors. The building is also equipped with an innovative water system that diverts rain water to a 10,000-litre underground cistern that manages storm water and fully supports and sustains landscaping irrigation. 

Manulife Place Dojima, Osaka

Located in the heart of Osaka’s central business district, Manulife Place Dojima is a cornerstone of our Asian portfolio; it's also a strong sustainability performer—so much so that it achieved “S” rank, the top level in Japan’s CASBEE assessment.

CASBEE, which stands for Comprehensive Assessment System for Built Environment Efficiency, evaluates buildings based on environmental performance, interior comfort, and health and wellness.

All of these criteria played a role in MP Dojima’s "S" rank. Built in 2007, the 83,000-square-foot office building promotes biological diversity and showcases state-of-the-art building systems and an impressive maintenance plan.

In addition to building features, MP Dojima’s top CASBEE rank was also supported by staff initiatives. A great example of this is the "Disaster prevention guidebook," created by building staff and distributed to tenants. The book provides safety preparation and response plans for climate-related disasters prevalent in Japan, including typhoons, floods, and earthquakes. The guidebook folds to the size of a credit card so that tenants can always have it on hand.

MP Dojima also features ground floor retail space, underground parking, and access to business and entertainment amenities as well as multiple commuter rail and subway stations, including Osaka Station, the largest train terminal in western Japan.

Creating a buzz around our buildings

Since 2017, Manulife Investment Management has partnered with Alvéole, an urban beekeeping company, to host hives across our Canadian portfolio. Alvéole supplies the hives, bees, and beekeeping expertise, while Manulife Investment Management provides funding and a home on our rooftops.

In 2019, our Calgary team installed 11 beehives on the roofs of five buildings. To create a buzz around the office, the team invited all tenants to “Name the Queen Bee.”

Turns out our tenants are a creative bunch:  We received almost 200 submissions from 86 different tenants. Some of our favourites—Albeeta, Beeo-patra, Bumbalina, and the simple, but effective, Queen B.

Naturally, the winners received products made directly from our busy bees, including honey and lip balm. Each winner was also invited to participate in the honey extraction process—definitely not your typical day at the office!

Needless to say, we’re very excited about our partnership with Alvéole. By hosting hives, we’re doing our part to support biodiversity and boost the health of the ecosystem. We’re also helping bees to flourish in urban centres and educating our tenants on an important environmental issue. No mere trifle when you consider that we depend on our buzzing little friends for 60% to 70% of plant pollination. 1   

1   Earth Systems and Environmental Sciences , 2014.

Celebrating our outstanding green leaders

In an effort to thank our Green Champion community and local property teams for their leadership in sustainability, we launched an internal recognition program known as the Real Estate Sustainability Awards.

Our first annual Green Champion Leader Award went to Christina Harricharran in our Toronto head office. Christina’s innovative approach and hard work were instrumental in Manulife earning its first-ever Fitwel certification at 220 Bloor Street E in Toronto. She also helped the Toronto head office complex achieve a LEED Gold certification while also delivering numerous tenant engagement initiatives throughout 2019.

In addition, two property teams were the proud recipients of the Sustainable Building Standards Leader Award. Calgary’s Nikki Sincovich and Allison Gammage won for the industrial asset class, while California’s Chalinee Kember and Nicole Macaulay were recognized in the office category. This award recognizes those properties and teams that are taking proactive measures to reduce their environmental impact and engage with stakeholders. The Michelson in California boasted an impressive Sustainable Building Standards average level of 4.6 (out of 5.0), achieving a perfect score in 9 of our 13 sustainability standards.

Congratulations to all of our 2019 winners! It's with their continuous commitment to deliver on our sustainable objectives that we'll get it done together.

Taking the mound for charity

For the 29 th year in a row, Manulife Investment Management real estate employees took to the mound for the annual Manulife charity softball tournament in support of the Kitchener-Waterloo Humane Society.

Eighteen teams from across Manulife, including our own Toronto Towers real eestate team, made up of employees from our asset management, accounting, and audit services departments, enthusiastically suited up for the tournament. Who wouldn’t welcome the chance to spend a summer day at the diamond?

We're proud of our employees. Not only did they pull off another flawless event, but they raised over $22,000 to support the Humane Society’s mission to promote responsible treatment of animals through education, advocacy, and care.

Working with our managers is critical to ensuring that our sustainability commitments are achieved across our entire portfolio.

In Japan, our real estate team supports our third-party property managers to meet our global Sustainable Building Standards. They also work closely with our Japanese managers to adapt and develop programs that are applicable to the local market.

Together, the teams participated in our sustainability training and implemented key initiatives to meet our Level 1 standards, including developing energy and water management plans and an annual tenant engagement plan. 

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FF 94 - Wholesaling an RV Park: A Deal Case Study w/ Emma & Kyle Greenwood Collecting Keys - Real Estate Investing Podcast

• Entrepreneurship

In the early days of operating a real estate investing business, reinvesting profits is the key to scaling. That’s why Collecting Keys SCALE Community members Emma and Kyle Greenwood took their $50,000 assignment fee from an RV park deal to ramp up marketing and expand their portfolio. During this Friday Focus episode, the Greenwoods discuss their strategy to wholesale this RV park rather than keep it, and how they leveraged their win to grow their operations. They share the story of how they navigated wholesaling a new asset class, from handwriting letters and meeting with the sellers to getting under contract and managing a tricky disposition. Join us for another interesting deal case study! Connect with Emma and Kyle: https://www.instagram.com/TheEmmaGreenwood/ https://www.instagram.com/loose_tribe/ Check out the FREE Collecting Keys “Sub To Transactions” Master Class! https://collectingkeys.com/subto If you’re an established investor with money to invest, but not the time, check out the Instant Investor PRO Program! https://collectingkeys.com/ Check out the Big Dan Energy shirt (and more!) in the Collecting Keys Merch Store: https://store.collectingkeys.com/ Download the FREE 5-Step Guide To Generating Off Market Leads here: https://collectingkeys.com/free/ If you are interested in learning from Dan and Mike to receive coaching and learn how they built their business, head to https://collectingkeys.com/keyscon-2023/ and see if you are a good fit for the mastermind group! Collecting Keys Podcast Resources: https://collectingkeys.com/ https://www.instagram.com/collectingkeyspodcast/ https://www.instantinvestorprogram.com/ https://www.instagram.com/mike_invests/ https://www.instagram.com/investormandan/ https://www.youtube.com/@collectingkeys This episode was produced by Podcast Boutique https://www.podcastboutique.com

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Is Real Estate a Solid Investment?

R eal estate investing was once an exclusive club of the wealthy. They were the only ones with the access and finances to invest in income-producing commercial real estate. That gave wealthy investors an advantage because they could use real estate to build and sustain their wealth.

That's no longer the case. Anyone can invest in wealth-creating real estate through real estate investment trusts ( REITs ) and other options. However, while the door is open to anyone to invest in real estate, the ultra-wealthy invest more money into alternative investments like real estate than other investors. Here's a closer look at the data on why wealthy investors gravitate toward alternatives like real estate and why others should consider following the money and increasing their allocation to real estate.

Why the wealthy invest in real estate

According to a survey by alternative investment manager KKR , high-net-worth families allocated 11% of their portfolio to real estate. That was third behind listed equities at 31% and private equity at 27%.

The wealthy have a meaningful allocation to real estate because it has proved to be a solid investment. Over the past decade, real estate has returned 8.8% annually, based on the NCRIEF Property Index. That has significantly outpaced the 1.5% annual return over the past decade of bonds, which many wealthy investors use to help diversify their portfolios, reduce risk, and generate income. Real estate can accomplish those goals while delivering a higher total return thanks to property value appreciation. On top of that, it has tax advantages and benefits from inflation, something bonds don't offer.

Real estate's diversification benefits are noteworthy. A major reason the wealthy invest in alternatives is to reduce their exposure to public stock and bond markets. Alternatives like private equity and real estate deliver returns that are less correlated to the daily gyrations of the public markets, which can help investors reduce volatility and enhance returns.

How you can invest like the wealthy

Congress created REITs in 1960 to empower anyone to invest in income-producing and wealth-creating real estate. All you need to do is open and fund a brokerage account to start investing in REITs. Here are two solid options for beginners:

Realty Income

Realty Income (NYSE: O) is a diversified REIT that invests in free-standing retail, industrial, gaming, and other properties. It signs long-term net leases for these properties with high-quality tenants. Net leases make the tenant responsible for covering real estate taxes, building insurance, and maintenance costs. Wealthy individuals will often invest in net lease real estate because these properties are more passive investments compared to other types of real estate investment.

The REIT pays a monthly dividend that currently yields 5.9%. It has increased its dividend 124 times since its public market listing in 1994, growing the payout at a 4.3% compound annual rate. That growing income stream and rising property values have enabled Realty Income to deliver a strong 13.9% compound annual total return since it came public. Shares of the REIT only cost around $50 a piece, making it a very affordable investment.

Invitation Homes

Invitation Homes (NYSE: INVH) is a residential REIT focused on single-family rental homes. Many people start investing in real estate by purchasing a rental property. Invitation Homes is an easier way to get started . It offers instant diversification, owning or managing over 100,000 homes across 16 markets, and does so for a very low cost, considering shares are about $35 apiece.

The REIT pays a quarterly dividend that yields 3.2%. Invitation Homes is better than owning a rental property because it supplies truly passive income. You don't need to manage tenants or deal with unexpected repairs, which can turn a property from a money maker into a money pit in no time. Invitation Homes has historically supplied investors with a steadily rising passive income stream. It has increased its dividend every year since it came public in 2017, including by nearly 8% late last year.

Congress leveled the playing field to enable anyone to invest in income-generating real estate by creating REITs. Technology and additional legislation have made private real estate more accessible in recent years. Several online platforms have launched to enable anyone to invest in private real estate to benefit from the additional diversification these non-correlated investments offer. Notable options include:

• Fundrise : Fundrise enables anyone to invest in private real estate through its funds and nontraded REITs . The company's flagship fund focuses on build-for-rent single-family homes, multifamily apartments, and industrial properties. Anyone can invest on the platform starting with as little as $10.
• Arrived : Arrived offers anyone the opportunity to invest in professionally managed rental homes and vacation rentals. The company sells interests in the properties on its website for as little as $100.

It's easy to invest like the wealthy

The wealthy have historically invested in real estate because it's a solid investment. It generates passive income, delivers attractive returns, and has other benefits.

However, you don't have to be wealthy to invest in real estate. Anyone can invest in wealth-creating REITs or private real estate through an online portal. Real estate can help you diversify your investments and build wealth, making it a solid addition to any portfolio.

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Global Financial Integrity

SOME OF OUR TOP ISSUES

• Anti-Corruption
• Illicit Financial Flows
• Natural Resources
• Anonymous Companies
• Money Laundering
• Transnational Crime

Home Research/Analysis Money Laundering Risks in Commercial Real Estate: An Analysis of 25 Case Studies

Money Laundering Risks in Commercial Real Estate: An Analysis of 25 Case Studies

May 1, 2024

Today Global Financial Integrity, in conjunction with the FACT Coalition and the Anti-Corruption Data Collective, is releasing a report with identifies 25 cases in which illegal, allegedly illicit or suspicious funds were funneled into commercial property in the United States over approximately the last 20 years.  With a total value of property exceeding $2.6 billion, California, Florida and New York are some of the most favored locations for these illegal investments, but criminals stashed money across some 20 different states. This money originated from around the globe and includes suspicious funds from 14 countries, including Iran, North Korea, Kazakhstan, Russia and Mexico. As varied as the sources of funds were, so too were the types of properties involved. Hotels, shopping malls, supermarkets, a music studio and an equestrian facility in addition to more pedestrian office high-rises.

It should be noted that our research represents only known cases involving U.S. commercial real estate: the actual number is likely much higher. Our data definitively shows, however, that commercial property in the U.S. offers criminal syndicates, cartels, kleptocrats and fraudsters an easy path to hide and launder their ill-gotten gains. Russian oligarchs facing international sanctions have also invested in U.S. commercial real estate. Shockingly, eight of the 25 cases involve foreign government officials or their relatives, yet the links to these Politically Exposed Persons were only uncovered long after the purchases.

In recent years it has become increasingly clear that the combination of complex financing schemes and a lack of transparency mean commercial real estate provides a unique opportunity for laundering huge amounts of cash with a relatively low risk of detection. Identifying who is behind the purchase of commercial property often presents a significant challenge given large financial flows from real estate investment trusts and private investment groups, in addition to funds from shell companies formed and operated by registered agents, proxies and/or attorneys. 

Key Findings

– More than $2.6 billion in suspicious funds were invested in commercial real estate in 22 U.S. states over approximately the last 20 years. The actual figure is likely much higher.

– Funds used to buy commercial real estate in the United States originated in 14 different countries including Russia (4 cases), Mexico (4 cases), China, Malaysia, Iran and Kazakhstan (see Map 2).

– Of the 25 cases reviewed for this study, 14 involved either politically exposed persons or oligarchs who typically have especially close relationships with foreign government officials. 

– The types of properties appearing in cases fall into four broad categories: land/buildings, business facilities (e.g. music studios, health facilities), retail spaces (e.g. supermarkets, hotels) and industrial sites (e.g. steel plants). 

– Weak or non-existent reporting requirements by professions involved in the purchase of commercial real estate contributed to the ease with which illicit funds were laundered.

Recommendations

• FinCEN should adopt a reporting obligation for multiple real estate professionals in a cascading order to ensure the requirement falls on at least one U.S.-based entity involved in the transaction, from both the buyer and the seller. As attorneys are legally required to be part of the closing process in almost 20 states, attorneys should be included with specific reference to the function they perform in the transaction.
• The rule should cover transfers of ownership that do not constitute a sale. Current rules only refer to purchases of real property by a legal entity. However, numerous cases of real estate money laundering simply involve the transfer of ownership or creation of equitable interest in the property without an actual sale. FinCEN should expand the types of transactions covered to include direct/indirect transfers of ownership or creation of equitable interest in the property.
• The rule should cover transactions by trusts: An increasing proportion of housing is now owned by legal entities and arrangements, including trusts. In Los Angeles, for example, 23% of rental units are owned by trusts. Both foreign and some domestic trusts are excluded from the purview of the Corporate Transparency Act. We recommend that transactions by all different classes of legal entities and legal arrangements be included in any prospective rule.

Insult to injury: Kushner dinged $15M after losing $186M deal

Bid to buy NJ, Hudson Valley apartments goes horribly wrong

Kushner Companies would have done well to let sleeping dogs lie.

An appeals court ruled against the firm this week in a case stemming from a $186 million multifamily deal that fell apart in February 2022.

Kushner sued the seller — the First Real Estate Investment Trust of New Jersey, or FREIT — to force the deal through and lost. But the would-be buyer did notch a small win when a New Jersey judge ruled Kushner could recoup its $15 million deposit.

Now, after a two-year legal tennis match, Kushner has lost out on that $15 million, too.

The dispute dates back to early 2020 when Kushner agreed to pay the New Jersey REIT $186 million for six apartment properties across northern New Jersey and the Hudson Valley.

When the pandemic lockdowns hit, Kushner asked FREIT for more time to inspect the assets and to push out the closing date. FREIT declined and told Kushner the deal was off, but Kushner sued for breach of contract.

The New York-based firm won back its deposit but not its deal to buy the properties. Then both sides went in for round two.

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Kushner filed a motion to hold FREIT accountable for attorney’s fees. FREIT did the same. In December 2022, FREIT came out on top, as a court denied Kushner’s motion and ordered it to pay FREIT $3.4 million in legal fees.

Neither side was satisfied. Kushner appealed the finding of breach and the order to pay legal fees. FREIT appealed the court’s decision about returning the $15 million deposit.

Last year, FREIT filed a new suit, alleging Kushner failed to pay the legal fees and was using its affiliate as “a shell to evade its debts and obligations.”

FREIT asked the court to “pierce the corporate veil and hold Kushner liable,” an SEC filing reads. Kushner, in September, filed a motion to dismiss.

On May 1, FREIT won again. An appellate court affirmed the ruling that Kushner’s affiliate had breached the deal. The judges also held the firm responsible for FREIT’s legal fees and rolled back Kushner’s sole win — on the $15 million.

The Appellate Division directed the trial court to order Kushner or its escrow agent to pay FREIT $15 million in damages. It also denied Kushner’s motion asking for reconsideration of the breach-of-contract ruling.

Neither firm immediately responded to requests for comment.

Companies and People

Ecosystem Kalinka

Luxury real estate in Russia, Europe, Asia and Middle East for a comfortable life and profitable investment. Our team — it is an association of market professionals, innovations and digital technologies, traditions and continuous development.

In the premium real estate market

Share of the moscow market, clients, including the forbes list, objects in the company's database., market experts work in the company, cumulative revenue, company turnover per year, the most expensive penthouse sold, ekaterina rumyantseva.

CEO of Kalinka Ecosystem

Our Mission: Tradition & Innovation

Pre–sale preparations

• Examination of competitors' sales
• Securing our sales plan
• Creation of a sales office
• Product training for brokers
• Development of efficient financial instruments
• Developing sales incentives

• Implementation of sales plan
• Premium brokerage/ brokers school
• Own client base
• Sales funnel management
• Mortgage broker services
• Legal support
• Monitoring of all stages of implementation

After–sales service

• Working with accounts receivable
• Informing the customer about the project status
• Working with customer reviews
• Loyalty programs
• Recommendation deals

International recognition

Aldar Properties

TOP Performing Dubai Agency

TOP 15 Performing Agency

Envoy Category

AZIZI Developments

TOP Performing Agency New Grade Reached

Select Group

TOP Performing Agent Runner Up

#1 Agen Newcomer of the Year

TOP Performing Sales Agent Ambassador Category

New grade reached Consul Category

Rolls–Royce

BEST REAL ESTATE AGENCY MARKETING RUSSIA

2021 – 2022

Awwards Winner

2019 – 2020

BEST REAL ESTATE AGENCY SINGLE OFFICE MOSCOW

REAL ESTATE AGENCY MOSCOW

2018 – 2019

2017 – 2018

official airline partner

The Telegraph

2016 – 2017

Rolls–Royce motor cards

2014 – 2015

in association with

Virgin Atlantic

PROPERTY CONSULTANCY RUSSIA

2013 – 2014

Best real estate company for high price category real estate according to the magazine «Novyy Adres»

First place in the Forbes rating № 4 (25). Leader in the number of closed deals in the segment of high-budget real estate according to the survey of NVM Business Consulting.

First place in the real estate market records award in the category of «Professional pride» with the project «Dvoryanskoye Gnezdo».

Only Russian company to win in three «International Property Awards» nominations.

Best real estate agency in Russia according to the «Premio Internazionale Le Fonti» award. Winner of two «International Property Awards» nominations.

Best real estate agency in Russia according to the «International Property Awards» with the presence of representatives of The Daily Telegraph.

First place in the «European Property Awards» in «Real Estate Agency Marketing for Russia». A high appraisal of an important part of the company’s work — management of marketing and sales of real estate developers.

First place in the «European Property Awards» in «Real Estate Agency for Moscow, Russia»

Best company in both Real estate and Marketing according to the «European Property Awards»

Solutions for developers, investors and buyers

Urgent buyout of distress-assets, apartments trade-in, accurate assessment with ai, investors club, apartments for sale, investing in redevelopment.

«Working daily with buyers and sellers of real estate. We know everything, from the customer’s first call up to the final sales.»

Ekaterina Rumyantseva,

our own full-time team of analysts and investment advisors

Created and implemented more than 200 consulting projects, analysis of the target group behavior utilizing a modern crm system, analysis of 1,000 customer requests and 300 transactions per year, own real estate database, updated daily, purchase and support of related databases, data on real estate lots in “closed sales”, information about the actual transaction sum and bargaining, kalinka realty.

Buying, selling and renting real estate

Kalinka Consulting

Complex solutions for developers

Kalinka Legal services

Legal support and audit

Kalinka Design

Professional selection of architects and designers

Kalinka analytics

Reviews of the real estate market in Moscow and MO

Kalinka Media

Current webinars and  situation in market

Kalinka International

Profitable investment. Citizenship and residence permit

30% of real estate transactions are not done after the purchase decision has been made. That’s why we maintain a constant dialogue with the buyer, lawyers, mortgage brokers and designers, to study the needs and implement the solution.

Our Partners

• AB Development
• ANT Development
• Capital Group
• Central Properties
• Insigma Development

Investment companies

• Capital Partners
• Hines International
• Absolut Bank
• VTB Capital
• Gazprombank
• Sberbank Capital
• Otkritie Capital

Design and architecture

• Andrew Martin
• Artistic Design
• Aukett Swanke
• Candy & Candy
• Helene Benhamou
• Jade Jagger
• Kelly Hoppen

Kalinka International (UAE, Turkey)

Programs for any purpose:

• Visa-free travel
• Life and business abroad
• Tax residency
• Cross-border movement under restrictions
• Education and career of children abroad

Kalinka Dubai

• Buying property in the UAE
• Sightseeing tours of the best residential complexes in Dubai
• Capital transfer (urgent purchase of ready-made companies in the UAE, opening an account)
• Long stay apartments
• Yacht charter
• School education
• Restaurants, shopping, household matters
• Flight organization.
• Assistance with international itinerary planning

Simplified visa system

No income tax, high return on investment, full ownership.

The Ritz-Carlton Residences

Collection of luxury residences

UAE, Dubai, Dubai International Financial Center, Al Sukuk Street, 9/1

The complex is located on the coast of the picturesque bay of Dubai Creek, where the world-famous Ras Al Khor flamingo and wildlife sanctuary is located. A unique location among mangrove forests, small lagoons and lakes combines peace and tranquility with the advantages of a large metropolis.

Rent – Start of sales.year

DAMAC Lagoons

Family low-rise residential complex

UAE, Dubai, Dubai Land, El Hebia Fift

Family low-rise residential complex in the spirit of the Mediterranean cities in the depths of Dubai. Convenient location allows you to get to large shopping centers, business clusters and offices of international companies in 20 minutes. Nearby are medical facilities, schools, an equestrian club, golf courses and the Dubai Sports City multifunctional complex.

Rent – year

DAMAC Cavalli Tower

UAE, Dubai, Dubai Media City

Elite residential complex on the west coast of Dubai, in the prestigious Al Sufuh area.

Atlantis The Royal Resort & Residences

Complex in the center of the Palm Jumeirah crescent

UAE, Dubai, Jumeirah, Palm JumeirahUnited Arab Emirates, Dubai, Jumeirah, Palm Jumeirah

Luxury residential complex in the center of the crescent of the Palm Jumeirah in Dubai. The developed infrastructure of the man-made island is impressive: gourmet restaurants, modern fitness studios, luxurious wellness clubs, shops and boutiques in Nakheel Mall. Well-maintained walking and jogging paths stretch along the many kilometers of beaches with snow-white sands.

Canal-front luxury serviced apartments

UAE, Emirate of Dubai, Zabeel, Business Bay

Luxury canal-front serviced apartments in the heart of Dubai.

W Residences Dubai Downtown

Complex in the prestigious Downtown area

UAE, Dubai, Zabeel, Burj Khalifa

Elite residential complex in the prestigious Downtown area, in the center of Dubai.

Kalinka Turkey

• Elite real estate
• New buildings and secondary offers
• Investment property
• Sightseeing tours
• Second Citizenship by Investment Program

Get a selection of foreign investment offers

Moscow exclusive properties, 6 unique projects, popular areas of moscow, secure business transactions, developed infrastructure.

Sociocultural cluster with modern apartment buildings

Zvenigorodskaya 2nd st., 12

The residential quarter is located on an area of 4.5 hectares, 200 meters from the Ulitsa 1905 Goda metro station, surrounded by parks: Krasnaya Presnya, Krasnogvardeyskie Prudy, the December Uprising Park and the Presnensky Childrens Park

Poklonnaya 9

Premium apartment house

Poklonnaya st., 9

he complex is located in a prestigious location in the west of the capital. Panoramic windows offer magnificent views of Victory Park, Sparrow Hills and Moscow City towers.

Victory Park Residences

Elite family residences in the west of the capital

Brothers Fonchenko st., vl. 3

he complex is surrounded by green parks and iconic sights of the city. Panoramic windows offer magnificent views of Poklonnaya Gora, the Triumphal Arch and City skyscrapers.

Capital Towers

Residential skyscrapers 500 meters from Moscow City

Krasnopresnenskaya emb., 14, building 1

A 10-minute walk from the metro stations "International" and "Vystavochnaya", a little further - the platform of the MCC "Business Center" and "Testovskaya" of the first Moscow diameter. For motorists, convenient exits to the Third Ring Road and the Garden Ring are located 6 minutes from the complex.

Neva Towers

Complex on the territory of the business center Moscow-City

Krasnogvardeisky 1st pr-d, 17-18

Panoramic windows offer direct views of the legendary Ukraina Hotel, the Government House and the embankments of the Moscow River. Residents have access to the entire infrastructure of the business district within a 10-minute walk. Afimall shopping center, multiplex cinema, cafes and restaurants, fitness studios, beauty salons and viewing platforms.

Club city on the river

Volokolamskoe sh., vl. 71/12

Moskvoretsky Park is a 5-minute walk away. In 10 minutes by car - the parks Shodnya, Pokrovskoe-Streshnevo and Stroginsky. A grandiose sports infrastructure is planned on the territory of the peninsula: more than 30 types of activities in one location and three yacht clubs in the neighborhood.

Community participation

PR and Media

Kalinka is in the TOP-3 in terms of citation in  the media in the elite real estate market and in the TOP-5 of business class and investment segment. Monthly number of publications mentioning Kalinka  — 250-300. Main sources: RBC, Forbes, Vedomosti, Kommersant, BFM, Elitnoe.ru. Joint analytics and press releases with leading Moscow developers: Insigma, AEON, Level Group and others. The Kalinka press service is always open to the media: journalists can be sure of comments, interviews and expert opinions. We promptly respond to requests and help the editors in the preparation of objective and high-quality materials.

A fifth of the entire interior improvement in the premium segment is created in the area of Minskaya Street

According to research of the Kalinka Ecosystem, the total area of internal landscaping in 40 projects on the premium real estate market in Moscow is 43.5 hectares.

Russians remain the leaders in buying Turkish real estate

Russians still occupy the first place in the demand for real estate in Turkey among foreigners. However, compared to 2022, there is a decrease in demand from our fellow citizens by 17%.

"Obydensky No. 1" became the best-selling club house in Moscow

According to a study of the Kalinka ecosystem, sales in 11 club houses started in the capital in 2023. The leader in sales was the club house "Obydenskiy No. 1", in other projects clients purchased on average four times fewer apartments.

Stay up to date with the latest news

We promise to send only interesting and important articles.

CEO of International consulting company Kalinka

Alexey Chumalov

General manager of Kalinka Moscow

Alexander Shibaev

General manager of Kalinka Middle East

Yulia Kovaleva

City real estate manager

Polina Medelyanovskaya

Denis Trusov

Dmitry Mezhinsky

Mikhail Dolgov

Head of Country Property Department

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The fishy death of Red Lobster

Endless Shrimp didn't sink the seafood chain. Wall Street did.

With the chain on the verge of bankruptcy, it has become abundantly clear that Red Lobster letting customers eat all the shrimp their hearts desire was not a great business idea . It's also not the reason the restaurant is in a deep financial mess .

In mid-April, Bloomberg reported the debt-laden seafood chain and home of beloved cheddar biscuits was considering filing for Chapter 11 bankruptcy protection. Red Lobster is being bogged down by increased labor costs and expensive leases on its restaurants. Some observers were quick to blame the financial woes on its decision last year to make its "Endless Shrimp" promotion, which used to be an occasional, limited-time offering, permanent. The move was not a smart one. While Red Lobster increased traffic somewhat, people coming in to chow down on all-you-can-eat shrimp was a money bleeder. The company blamed Endless Shrimp for its $11 million losses in the third quarter of 2023, and in the fourth quarter, the picture got even worse, with the restaurant chain seeing $12.5 million in operating losses.

But the story about what's gone wrong with Red Lobster is much more complicated than a bunch of stoners pigging out on shrimp (and, later, lobster ) en masse. The brand has been plagued by various problems — waning customer interest, constant leadership turnover, and, as has become a common tale, private equity's meddling in the business.

"If anything, the Endless Shrimp deals are probably as much a symbol of just either desperation or poor management or both," Jonathan Maze, the editor in chief of Restaurant Business Magazine, said.

Red Lobster first opened in Lakeland, Florida, in 1968 and was acquired by the food conglomerate General Mills in 1970. General Mills then spun the chain off in 1995 along with the rest of its restaurant division, which also included Olive Garden, as Darden Restaurants. In 2014, amid flagging sales and pressure from investors, Darden sold Red Lobster for $2.1 billion to Golden Gate Capital, a San Francisco private-equity firm.

If anything, the Endless Shrimp deals are probably as much a symbol of just either desperation or poor management or both.

To raise enough cash to make the deal happen, Golden Gate sold off Red Lobster's real estate to another entity — in this case, a company called American Realty Capital Properties — and then immediately leased the restaurants back. The next year, Red Lobster bought back some sites, but many of its restaurants were suddenly strapped with added rent expenses. Even if Darden had kept Red Lobster, it's not clear it would have taken a different route: A press release from the time says it had contacted buyers to explore such a transaction. But in Maze's view, the sale of the real estate was sort of an original sin for Red Lobster's current troubles. He compared it to throwing out a spare parachute — chances are, you'll be OK, but if the first parachute fails, you're in deep trouble.

"The thing that private equity does is just unload assets and monetize assets. And so they effectively paid for the purchase of Red Lobster by selling the real estate," he said. "It'll probably be fine, generally, but there's going to come a time in which your sales fall, your profitability is challenged, and your debt looks too bad, and then suddenly those leases are going to look awfully ugly."

That time, according to recent reporting, is now. With struggling sales and operational losses, the leases are an added headache that is helping push the company to the brink, though bankruptcy may help Red Lobster get some wiggle room on them.

Eileen Appelbaum, a codirector of the Center for Economic and Policy Research, a progressive think tank, and a longtime private-equity critic, said in 2014 that private equity wouldn't be the solution to Red Lobster's ills. She isn't surprised about how this is all turning out.

"Once they sell the real estate, then the private-equity company is golden, and they've made their money back and probably more than what they paid," she said, noting that this was a common theme in other restaurants and retailers and adding: "The retail apocalypse is all about having your real estate sold out from under you so that you have to pay the rent in good times and in bad."

After the real estate move, Golden Gate sold 25% of the company in 2016 to Thai Union, a Thailand seafood company, for $575 million and unloaded the rest of the company to an investor group called the Seafood Alliance, of which Thai Union was a part, in 2020. Golden Gate likely came out ahead, but the same can't be said for Thai Union, which also controls the Chicken of the Sea brand. It is now looking to get out of its stake in Red Lobster and took a one-time charge of $530 million on its investment in the fourth quarter of last year. In 2021, Red Lobster refinanced its debt, with one of its new lenders being Fortress Investment Group, an investment-management group and private-equity firm. According to Bloomberg, it's one of the "key lenders" involved in debt negotiations now.

Beyond the pandemic-related troubles that hit restaurants across the country , analysts and experts say that Red Lobster's particular problems are attributable to a mix of poor brand positioning and unstable leadership. The seafood-restaurant business is a tough one in the US, and people who are hankering for lobster or fish are increasingly going to steak houses that offer those options, said Darren Tristano, the CEO and founder of Foodservice Results, a food-industry consultancy.

"What's truly happened with Red Lobster is that the consumer base has changed and Red Lobster hasn't," he said. "Red Lobster isn't losing to a competitor in their space — they're losing to competitors outside their space."

John Gordon, a restaurant analyst in San Diego, said Red Lobster had been on the decline for 20 years but that it didn't "fall on the knife" until Thai Union got it. "They were totally unprepared to hold a casual-dining restaurant," he said. Kim Lopdrup, Red Lobster's longtime CEO, retired in 2021, and since then, the restaurant hasn't had much in the way of stable leadership. His successor resigned after only a matter of months, and the role remained vacant for more than a year before someone else was appointed. He's left, too, and now Jonathan Tibus, an expert in restructuring, is at the helm.

"One of the problems is that Thai Union just had no credibility in terms of recruiting a new CEO," Gordon said.

Essentially, Red Lobster finds itself in a landscape where there just aren't a lot of bright spots. Add on the weight of the debt and lease obligations the company's private-equity owners saddled the brand with, and a turnaround becomes a gargantuan task.

"It's hard to blame leadership when you have a problem that is unsolvable — I mean, getting the consumer back in the door, increasing traffic. All-you-can-eat shrimp can only do so much," Tristano said.

Red Lobster did not respond to a request for comment for this story. Golden Gate declined to comment. Thai Union pointed to a press release about its intention to exit its investment and said it didn't wish to comment further.

One bad promotion should not doom a restaurant chain like that.

As to what drove Red Lobster to the edge, it's clear that despite not being a very good idea, the blame doesn't fall on Endless Shrimp. Years of changing tastes, tough industry conditions, and poor brand management all contributed to the chain's difficult position. But plenty of other restaurants have faced similar issues and aren't on the verge of bankruptcy. What separates Red Lobster is a decade of private-equity and investor tampering. Pinging from owner to owner makes it hard to settle on a turnaround vision. The company faces challenges that necessitate a long-term view that requires patience — the kind that the short-term-focused Wall Street often struggles to tackle. Whether Red Lobster can turn it around from here remains to be seen: Even if it files for bankruptcy protection, the chain may not disappear. Plenty of companies go bankrupt and keep on keeping on.

"You've got to at least be able to pay your bills, and what's happened over the last five years is the cost of operating a restaurant has taken off," Maze said. "One bad promotion should not doom a restaurant chain like that."

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.

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