Goldman Eyes Real Estate Investments Away from Coastal Cities

Article originally posted on National Real Estate Investor on November 15, 2019

Institutional investors see opportunities in real estate in mid-size U.S. cities away from the coasts.

Goldman Sachs Group Inc. is eyeing markets including Denver, Austin and Nashville, Jeffrey Fine, a managing director at the firm’s merchant-banking division, said Thursday at a conference hosted by the NYU School of Professional Studies.

“Companies are moving there, young people are moving there, there’s an affordability component to it,” Fine said. “We’re looking at places in Texas where taxes are having a big, big, big impact.”

Goldman’s merchant bank — which makes both debt and equity bets — is not a large investor in New York or Washington because of slower job growth and an unattractive supply-demand dynamic, he said.

Growth markets are also a focus of the Baupost Group, according to Nick Azrack, a managing director at the firm. There’s still money to be made, he said, even though markets like Nashville have already attracted significant investment.

“How tall can that tree grow, we don’t know, but we’ll keep trying to climb it, because why wouldn’t you?” he said. “If you can find a way to cushion your fall, that’s a great what to capitalize on those sorts of opportunities.”

Some investors are still putting money into coastal markets. Those areas have historically been better at preserving value during economic slowdowns, according to Cia Buckley Marakovits, chief investment officer of Dune Real Estate Partners. She said her firm is taking a “cherry-picking” approach on the coasts, while also investing in hospitality and health-care real estate.

“We’re just looking more holistically at what will outperform in a slowdown,” she said.

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