The real estate sector has seen a mix of ups and downs over the past year as single family homes across the country surged and in certain markets, multifamily inventory struggled, as consumers sought to leave urban areas in favor of the suburbs. But with many urban markets seeing a strong recovery, investors are appearing increasingly bullish across the board. One such investment firm is DMG Investments, a New York-based investor and developer that has continued seeking out acquisitions throughout the pandemic and sees 2021 as opportune for buying, especially in key areas that are receiving companies that are migrating away from traditional hubs.
With DMG’s $700M in holdings across numerous multifamily property markets, they have plans to deploy more capital into affordable housing solutions and even student housing, which makes up part of their current portfolio. We sat down with DMG’s COO Jeffrey Amengual to get his take on where 2021 could take the US real estate market and how investors like himself are positioning accordingly.
What markets is DMG's portfolio most concentrated in?
Jeffrey Amengual: Our investment portfolio at DMG Investments primarily consists of multifamily real estate nationwide, including everything from luxury condos and rentals to student housing developments.
In fact, our collection of student housing communities, known as Auden Living, comprises 5 properties across the country serving universities such as Cornell, Rice, SUNY Albany, University of South Carolina, University of Houston, University at Buffalo and others.
We are also well-known for One Park Condos, our luxury residential development located in Cliffside Park, NJ that encompases 14 floors of ultra-luxury condos overlooking the Hudson River and New York City skyline.
We also have holdings in modular housing and commercial real estate.
What is your macro view on the direction of real estate in 2021 and what factors are influencing that?
JA: We're quite excited about the US real estate market in 2021. Our outlook is that multifamily housing in urban cities is particularly poised for strong growth due to the shortage of workforce housing that we are seeing across the US. We are seeing a number of large corporations, especially in technology and finance, that are decentralizing their operations and expanding offices into what were previously secondary cities due to lower operating costs and higher quality of living for employees, especially in light of the COVID pandemic. As a result, many of these cities have a shortage of affordable housing to accommodate the influx of new workers. We're very focused on making acquisitions where we can develop affordable housing options in those cities.
Are there any strategic shifts you're making to where you allocate capital?
JA: One of the top trends on our radar right now is modular housing. It presents enormous benefits, including lower cost and safer construction, a higher quality of housing that can be built and even environmental benefits. We are currently developing a number of modular apartment complexes and are actively seeking out additional acquisitions in that space. In fact, we are currently designing two modular projects in Albany and Ithaca, NY.
What is one of the more underrated sectors of real estate that more investors should have on their radar?
JA: Affordable workforce housing is the most important sector to watch this year. We are seeing a historic number of employees be relocated by their companies out of tech and finance hubs like New York and Silicon Valley into markets like Miami, Austin and many more. It's putting tremendous stress on countless local markets as investors and developers move to provide the needed housing for this population growth.
How does the current interest rate and stimulus environment impact your decision-making around new acquisitions? Is inflation a concern?
JA: With the extended environment of low interest rates that we are in, it's provided many opportunities to make strategic acquisitions on favorable terms. That makes the timing in the market opportune right now for investors to be looking at their capital allocation to real estate. We see these market conditions continuing for the near future making the cost of capital very beneficial to increasing exposure to multifamily real estate in those stressed secondary markets that I mentioned. Inflationary risks do not appear to be a threat at this point although hedging against those risks with prudent acquisition practices is always a priority for us. Overall, we're optimistic that 2021 presents a number of long term buying opportunities for the real estate sector.