Essential Real Estate Proven to be a Resilient Investment
The continued disruption of traditional retail by e-commerce has made the sector a less resilient real estate investment according to real estate mogul Ben Mallah. In contrast, Mallah built his “$500 million real estate empire” by investing in what he calls ‘necessity real estate’ or ‘essential real estate” — properties with retail tenants that provide “things that people can’t go online and accomplish, such as hair and nail salons, food, good, strong restaurants; as well as dental and medical.” Grocery-anchored real estate is also a good investment, and for savvy investors it offers the significant advantage of stability, since supermarkets are typically long-term tenants because they cater to the everyday needs of local communities. Although investment in this type of property sector was “once reserved for institutional and elite investors,” it has become increasingly accessible to a broader audience. A cited example includes First National Realty Partners (FNRP), whose properties are leased to national brands like Whole Foods, CVS, Kroger, and Walmart. The NJ-based platform allows accredited investors to own shares in its institutional-quality properties enabling them to enjoy stable cash flow “thanks to Triple Net (NNN) leases,” without the hassle of finding and managing deals themselves. Real estate investment trusts (REITs) offer another option for grocery-focused investment, citing Slate Grocery REIT (SRRTF), which “holds a portfolio of 116 properties, with 95% anchored by grocery stores” giving investors diversified exposure to essential real estate.
Another essential real estate sector is the housing market, since people will always need a place to live; and furthermore, due to the housing shortage that the U.S. is currently facing, demand for residential properties has intensified. However, high home prices and elevated mortgage rates make it challenging for individuals to purchase rental properties outright; but crowdfunding platforms enable everyday investors to own shares without “large down payments or management headaches” typically associated with residential real estate. REITs such as American Homes 4 Rent (AMH) and Equity Residential (EQR), can also serve as a starting point for further research among those looking to gain exposure in this sector. Mallah has “built a portfolio that stands strong against the forces reshaping the consumer landscape” by investing in businesses tied to basic needs; and for those smaller scale investors that have a sharp eye and want to begin adopting Mallah’s strategy, don’t overlook properties that “nobody else wanted” it can turn out to be a missed opportunity for those that didn’t take a closer look.